Residential sales momentum in 2H12 still shaky: Collier's International

URA's flash estimates pose healthy demand but the growing price resistance and looming oversupply may slacken the pace.

Here's what Collier's International commented:

Low interest rates continued to drive robust buying demand for private homes. With rouse take-up of new homes and prices of new homes reaching new highs, the exuberance has started to filter into the secondary market, which has begun to see a pick-up in activities in recent months.

Furthermore, the narrowing of price gap between new mass-market homes and completed higher-tier properties in the secondary market has enhanced the attractiveness of the latter segment. This has prompted discerning buyers to seek opportunities for mid- and high-end homes in the secondary market, which has in turn provided support for prices in the RCR to remain firm and the impetus for price increase in the CCR.

Meanwhile, although healthy demand and the continued supply of new mass-market projects has continued to fuel price increase in the OCR, the slower pace of increase by 0.4% in 2Q 2012 compared to the 1.1% rise in 1Q 2012 indicates the growing resistance of homebuyers to further price growth.

The high liquidity and favourable interest rate environment remains supportive of home-buying demand. However, it remains to be seen if the strong sales momentum can sustain for the second half of 2012.

Increasing price resistance and the onslaught of the upcoming supply of residential land through the 2H 2012 GLS Programme may work to ease demand for homes in the next six months, considering that pent-up demand is gradually being met.

Furthermore, the increasing price resistance borne out in moderating price growth in the mass-market segment should help to moderate any price increases for the next two quarters. Overall, given that URA’s all private residential property price index has appreciated by 0.3% in 1H 2012 based on its flash estimate for 2Q 2012, private home prices are foreseen to remain relatively stable with marginal upsides for 2H 2012.