January developer sales failed to break 5-year lows

Price sensitivity among genuine buyers intensifies.

According to Barclays, January developer sales rebounded m/m but remained at five-year lows. Trends show increasing price sensitivity among genuine buyers, resulting in significantly lower sell-through rates for high-priced new launches.

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Last week's fine-tuning of the Total Debt Servicing Ratio (TDSR) brought marginal relief, and we maintain our estimates for volumes to decline 20% y/y in 2014 and for a price decline of up to 20% by 2015. We believe February could see some price-cutting as competition for the smaller pool of buyers heats up.

We prefer REITs over developers with our top picks remaining CapitaCommercial Trust, Keppel REIT and CapitaLand (all rated Overweight).

Developer monthly sales remained at five-year lows: Private home sales doubled m/m in January 2014 to 565 units but declined 72% y/y to the lowest since January 2009 when 108 units were sold.

Half of the sales came from the new-concept 60-year leasehold retirement village homes at Hillford, developed by World Class Developments – all 281 units were sold at a median price of S$1,105psf. The other major launch in January, The Panorama by Wheelock, sold only 58 units or 8% of the total of 698 units at S$1,343psf.