TWO months of strong home sales may have sparked hopes of resilience in certain parts of the property market here, but the sector is still plagued by problems, said a CIMB-GK Securities report yesterday.
A supply overhang – due to default threats from deferred payment scheme buyers – and potential price falls in the high-end market, continue to weigh on property fundamentals, said Mr Donald Chua, who authored the report.
“There are issues that have not gone away … because of two months of good sales in the mass market,” he told Today.
In March, 1,220 uncompleted private homes – dominated by mass to mid-tier projects – were sold, holding up from February’s 1,323 units sold and much higher than January’s 108 units. But Mr Chua warned the buying frenzy “may well lose steam in the coming quarters” if land inventories for such projects run out and public housing prices start to retreat. “With the exception of City Developments (CDL), Fraser & Neave and UOL, we are hard-pressed to find other direct beneficiaries of this mass-market cycle,” he said.
He also believes aggressive price cutting will spread to the high-end homes, as appetite for the segment improves and leads more developers with cheap inventories to launch prime district projects.
This will put pressure on those who bought high-end land during the last up-cycle, said Mr Chua. “Falling prices will likely force developers to write down land-bank values on their books, something consensus is probably already expecting.”
In another report, Deutsche Bank warned the high-end market would remain sluggish, while pick-up at the lower end may not be sustained as pent-up demand gets satiated, Dow Jones Newswires reported.
Other brokerages were more bullish. OCBC called the current situation a “good opportunity for developers to lighten up their land bank and capture new sales to extend their earnings visibility”.
Source : Today – 17 Apr 2009