Potential new launches Private Resident Projects

With the recent success of mass to mid market projects YTD, sentiments have turned positive for the overall Singapore property market. Riding on the initial wave of revived interest, we believe developers will be looking to move up the market and start launching their mid to high end projects which have previously been held off. Of the potential upcoming new launches, we estimate more than half will be in the mid to high end (Core Central Region) segment. This compares to less than 10% of the projects which were launched YTD in the Core Central Region.

Developers like Fraser Centrepoint, UOL and Far East were the first to launch their projects early this year when the market was still extremely weak. Having a substantial landbank with mass market projects in the pipeline, these first movers tested the market with selected developments targeting HDB upgraders. Post the initial run up, we expect some mid-cap developers like Allgreen, Ho Bee and Wing Tai to play catch up and will begin to launch their projects in the mid to high end segment.

We have seen strong new sales since February, holding up above the 1200 units level. Given the continued success of recent launches, we expect new sales to remain strong. With a boost in sentiments driven by the primary market, we are seeing transaction volumes in the secondary market also trending upwards. For 2Q09 (to date) 1,400 secondary transaction have been recorded which is already above the total secondary transaction volumes for the 1Q09. We forecast volumes in 2Q09 to be stronger QoQ and to sustain above the mean of 4,200 units. In past cycles reversion above mean of transaction volumes is one of the key trends which precedes pricing growth.

We expect positive pricing growth in the near term supported by positive net absorption in 2010 given the moderated supply outlook. We expect new supply of 5,200 units (from 18,000 units previously). However, we believe the market will sideline or trend downwards post 2010 as supply return to the system. Currently, we are expecting more than 12,000 and 14,000 units due for completion in 2011 and 2012 respectively. Given the aggressive new launches by developers hoping to catch the rebound in the market, the issue of excess supply to hit the market will limit further pricing upside post 2010.

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