Singapore property developers are losing momentum

As residential property prices grew a measly 0.2% in 4Q11.

DMG foresees a drop off in transaction volume with potential buyers adopting a wait-and-see attitude and expects prices in new launches at the lower end of expectations leading to lower overall residential prices from 2Q12.

Here’s more from DMG:

URA released its flash estimates for the 4Q11 residential PPI, which saw a +0.2% QoQ increase in residential property prices. This latest data point follows from a rise of +1.3% in 3Q11, which reflects further moderation of the upward momentum in private residential prices. From a sub-segment perspective, notably the mass segment is showing significant easing in price momentum rising +0.6% in 4Q11 versus +2.1% in 3Q11.

Private residential sales continue to decelerate. URA released its flash estimate for the residential PPI for 4Q11, which saw a +0.2% QoQ increase in residential property prices. This latest data point follows from a rise of +1.3% in 3Q11, which reflects further easing in the upward momentum of private residential prices as the rate of increase in prices continue to moderate for the 9th sequential quarter. Prices in the CCR, RCR and OCR increased by 0.5%, 0% and 0.6% respectively during the quarter, compared to 0.7%, 1.2% and 2.1% respectively in 3Q11.

Mass segment projects to test market demand. Since the flash estimates are compiled based on transactions in the first ten weeks of each quarter, we believe post ABSD policy impact is yet to be reflected in the industry figures. In the near term, we may see potential new launches in the mass segment to test market demand in 1Q12 eg. Hillier by Far East (Hillview, 528 units; TOP 2015) of which according to press reports half of project has been sold after launch post ABSD, Watertown by F&N/Far East/Sekisui (Punggol, 992 units; TOP 2017) and CDL’s The Rainforest EC (CCK, 466 units; TOP 2015).

Expect range-bound performance, NEUTRAL on developers. Moving forward i) we foresee a drop off in transaction volume with potential buyers adopting a wait-and-see attitude ii) while we think there is still buying demand in the mass segment with first time buyers unaffected by the new measures, we expect prices in new launches at the lower end of expectations leading to lower overall residential prices from 2Q12.

While we think potential negatives are likely priced in, a lack of upside catalysts from a potential plateau in property prices and policy overhang suggests a lack of equity investors’ interest is likely to persist and developers’ share price performance likely to be range bound.