Crossing the 1,000 mark for the first time since Aug 07. A staggering 1,323 private homes (+1125.0% MoM, +600.0% YoY) were snapped up in Feb 09, exceeding our forecast of ~ 1,000 units. We estimate 90% of the sold units were below S$1,000 psf, with a bulk of them from mass-mid market projects, e.g. Caspian, Alexis and The Quartz. As per our predictions, prices in the mass and mid market remained flat at S$700 and S$800 psf respectively. While activity within the prime region was comparatively subdued, the 102 transacted units represented a notable MoM improvement (13 units in Jan 09), mainly helped by old projects being re-launched at 10 – 25% price discounts, namely D’Chateau, RV Suites, Parc Sophia and Lucida. As such, average prices ended 11% MoM lower at S$1,400 psf. A total of 1,069 units were launched, with a healthy take-up of over 100%.

Absolute pricing the clincher. While it is true that mass market projects typically perform better during recessions, low absolute pricing is the present key sales driver, with buyers lured by low lump sums of S$500 – 900k. Interest Absorption Scheme’s introduction also helped, as buyers were only required to fork out a reasonably affordable upfront payment and service the mortgages upon TOP. Other secondary drivers include convenience level, i.e. accessibility to public transport (esp. MRT) and basic amenities, as well as pent-up demand from enbloc sellers and HDB upgraders who were priced out during the previous property upcycle.

More launches – new and old. We expect additional mass market launches ahead as more developers take the cue from the success of Caspian’s and Alexis’s pricing strategies to move their inventories. Other incentives include starker price discounts, rental guarantees and free renovation packages. Aside from new projects, we think there would be more re-launched (at deeper discounts) ones in order to generate cash flow, especially for smallish and niche developers. Looking forward, we reckon the 1,000 units/mth quantum is not sustainable. Within the next 3 – 6 months, except for Double Bay Residences, Arte and Ascentia Sky, most new projects are small-midsized. As such, we predict 500 – 600 units/mth for the next quarter. Subsequently, it would revert back to a normalized 200 – 300 units as the economy worsens and the HDB resale market softens. Any upside surprises would come from more price cuts (to clear stock) from already-launched big projects, i.e. Livia, Clover by the Park, Waterfront Waves and Kovan Residences.

Selected prime regions normalising. While the upcoming launches should be dominated by those from the mass market, we think there could be a gradual increase in mid-prime market projects. More notably, prices in selected prime locations appear to be nearing the levels last seen in previous crises and pre-2007 run-up. Our conjectures stem from recent visits to showflats, specifically projects within the River Valley enclave - RV Suites and The Mercury. The former was re-launched at S$1,150 – 1,300 while S$950 – S$1,100 was the asking range for the latter. Both quoted price ranges represent a far cry from the S$1,600 – S$2,800 range we witnessed during 2007 and 1H08 as well for selected projects. Other notable points include the 100% take-up for Kembangan Suites within a day, at average prices of S$900 – 1,000 psf. Maintain NEUTRAL rating for Property sector. While the swift 100% take-up of Alexis does signify a watershed change in preference towards smaller units, we believe the residential property market is still in the correction process, especially for prime projects. Buying sentiments here remain stifled, with specuvestors yet to make any tangible entrance, as evidenced from the tepid volume within the subsales market (under 100 units in Feb 09 vs. monthly average of ~ 400 units in 2H07). Most of the current buyers are either Singaporeans or PRs purchasing for genuine owning-occupying purposes. Coupled with the continued weakening economic environment, we do not see any concrete reasons to upgrade our current NEUTRAL rating for the property sector. CapitaLand (BUY TP: S$2.60) remains our sole BUY call among the three major developers under our coverage.