Brisk home sales only temporary: DMG

There's no escaping a 20% decline in primary home sales in 2012 despite a Chinese New Year surge.

OSK-DMG observed a healthy take-up for a Watertown project at Punggol and other mixed developments, but attributed this to a property binge driven mainly by horoscope beliefs. The year of the Dragon is supposedly prosperous for home purchases.

But most other properties are reeling from a dampened buyer's market, no thanks to the recent Additional Buyer's Stamp Duty measures.

Here's more from OSK-DMG:

Auspicious Dragon spurs property buying? According to the Chinese horoscope, the Dragon year is supposedly great for prosperity, which in turn is believed to be a good year for property purchases. At least this may be what Singapore homebuyers are thinking, as the Watertown project at Punggol (99-yr LH, 992 units; D19; TOP 1Q17) has seen strong sales since preview last week.

Following press reports of c.550 units sold to date of which c.90% are Singaporeans/PRs, from our visit to the showflat today we continue to observe a robust turnout of visitors for this project going into the 5th day of the Lunar New Year.

What a buyer is getting now. According to agents on site, c.590 units have been sold as of Friday afternoon today. Prices for the units range from S$1,000-S$1,400 psf, depending on the facing (road facing or waterfront facing) or whether the unit is a SOHO (which is priced higher due to the “double volume”). This is markedly higher than projects eg. A Treasure Trove (Sim Lian, ASP c.S$880 psf) and Prive EC (NTUC, ASP c.S$700 psf) in the vicinity.

Buyers are offered discounts of 15% off the list prices, as well as a further 3% stamp duty rebate after 8 weeks and a further 2% furniture voucher upon TOP. Mortgage rates remain at low levels, with mortgage bankers quoting mortgage rates of 3MSIBOR+0.65-0.7% for the first three years, 3MSIBOR+1% thereafter.

Unique positioning for mixed development. Singapore property buyers seem to have a penchant for mixed developments eg. Compass Heights, Orchard Residences, Hillier and the recent Bedok Residences, and the strong take-up for the Watertown project is another testament to this notion.

This project by a Far East/FCL/Sekisui House JV is an integrated waterfront development sitting on top of a retail mall, Waterway Point with 4 floors and 3 basement levels yielding NLA c.370,000 sf. Sited in a good location beside the Punggol MRT/LRT station, the project is along the Punggol Waterway which is expected to be host to recreational activities including cycling tracks and water sports, as part of the Master Plan for Punggol 21 plus.

Strong sales due to unique positioning; fall off in transactions inevitable. With a likely strong relation between developers’ share prices and transaction volume, we believe part of the recent positive share price performance for developers is likely attributed to healthy take up of recent residential projects like the Watertown project.

We reckon apart from a good location beside a transport node as well as developer discounts, this project’s unique positioning as a mixed development is likely the main draw to strong sales bucking the trend of other projects post ABSD measures affecting buyers’ sentiment.

Moving forward, we continue to believe primary transaction volume is likely to see a decrease at around -20%YoY for 2012, a dampener for developers’ share price performance. Maintain NEUTRAL for developers. SELL on CDL, TPS$7.98 and prefer diversified developers CapitaLand and Keppel Land.