Home sales to remain robust despite prices hitting all-time high in 4Q: Nomura

Echelon’s over 60% sale on week launch is an example.

The URA released the 4Q12 flash estimates for the private residential property price (PPI) index on 2 Jan 2013.

Overall, the PPI index rose to 211.9 pts (+1.8% q-q) in 4Q12, up from 208.2 pts (+0.6% q-q) in 3Q12. For 2012 on the whole, the overall PPI is up 2.8% y-y, vs. the 5.9% y-y increase in 2011.

Prices of non-landed private residential properties in the Outside Central Region (OCR) were up 3.4% q-q in 4Q12, versus a 1.0% q-q gain back in 3Q12. Prices of non-landed private residential units in the Core Central Region (OCR) and Rest of Central Region (RCR) rose 0.8% q-q and 0.9% q-q respectively in 4Q12.

In addition, HDB resale prices were up 2.5% q-q in 4Q12, vs. a 2% q-q increase in 3Q12. It appears, notwithstanding the government's move to cap the mortgage loan tenure in October, home prices across the board have continued to rise at a faster pace in 4Q12.

Nomura says that the latest numbers have no doubt increased the possibility of further government intervention but it argues that market’s anticipation of policy changes will actually boost sales in the near term.

Here’s from Nomura:

"The October measures were the sixth set of policy changes introduced by the government since September 2009 to cool the housing market (excluding other policy changes such as higher qualifying household income ceiling for BTO and EC purchases that would have indirect impact on private housing) but the market is clearly desensitized.

Ironically, the market's anticipation of further policy changes may even have a positive impact on home sales in the near term (i.e. the "buy before it becomes more restrictive" mentality), as suggested by the recent robust take-up of new launches such as Echelon along Alexandra Road. It appears the key question now facing the government is: 1) whether it makes sense to continue introducing measures that lack teeth and put its credibility further at risk, or 2) is it time to make a thorough review of the existing policies and make bold changes accordingly (i.e. the "straw" that could break the camel's back)."

CDL’s Echelon sold over 60% of its 508 units on it first weekend of sales at ASP of around S$1.7k psf.