Moderated increase in residential index. The latest 1Q11 numbers from URA showed a 2.2% QoQ increase in the private residential price index - the 6th consecutive quarter of moderating increases. However, the OCR (outside central region) index accelerated to a 3.1% QoQ increase, mainly due to several successful launches such as Waterfront Isle (561 units) and Canberra Residences (320 units) in 1Q11.
But effects of latest curbs still up in the air. The recent Mar 2011 sales data (non-landed sales up 25% MoM to 1,340 units) has been interpreted by some to reflect growing buyer sentiment. We are reluctant to do so. First, the Mar 2011 sales numbers were down 22% on a YoY basis. In addition, Feb is traditionally low-key and hence a MoM increase in Mar is typically observed. As an example, there was a whooping 47% MoM increase in unit sales in Mar 2010 even after the 19 Feb 2010 measures (when the seller's stamp duty was first imposed). Looking ahead, we believe the sales data for April would be crucial for an indication of the market impact after the last property measures, especially since it would precede the GE results in early May.
Pipeline shows austere posture from luxury developers. As of 1Q11, the private residential pipeline increased 4.8% QoQ to 68,887 units. The pipeline of CCR (core central region) units, however, decreased by 748 units. CCR developers also delayed an estimated 13% of their CCR pipeline (2,532 out of 20,188 units) originally slated for completion in 2011-2013. These measures suggest an austere posture from high-end developers
Mass segment - a potential lightning rod for more curbs. We believe the current situation indicates reduced sales volume but steady prices in the CCR segment. There is less clarity in the mass-segment and we think that a bullish uptick in OCR/RCR prices and volume, over the short term, would be worrisome on two counts. First, it would be a lightning rod for further government measures and secondly, it could potentially contribute to a physical over-supply in 2012-2013 as developers accelerate completion of sold-out projects.
Policy overhang - buy CMA for acquisitions ahead. We do not expect more curbs before the GE, but believe that cooling measures are possible later on, especially if prices and volume are bullish and if other markets impose more onerous curbs. We recommend CapitaMalls Asia (CMA) for its retail focus, attractive valuation and potential price catalysts from acquisitions this year. We have a BUY rating on CMA with a fair value of $2.15 (at parity to RNAV).
Moderated increase in overall residential index… URA provided its quarterly statistical update for 1Q11 yesterday afternoon. The overall private residential price index increased 2.2% QoQ, of which the non-landed price index was up mildly at 1.6% QoQ. This was the sixth consecutive quarter of moderating increases since 4Q09 - after the first of recent government cooling measures began on 14 Sep 2009.
But mass-segment index accelerated in 1Q11. This moderating trend, however, did not hold for the OCR (outside central region) index. In 1Q11, the OCR index accelerated to a 3.1% QoQ increase, up from 2.1% in 4Q10. We think several successful OCR launches, such as Waterfront Isle (561 units) and Canberra Residences (320 units), had contributed to this, despite the latest measures on 14 Jan 2011 which were expected to hit the mass-segment buyers hardest. Given the recent Mar 2011 sales data, where non-landed sales jumped 25% MoM to a healthy 1,340 units, we note some have interpreted this to be bullishness returning to the market.
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