Residential: Speculators have a hard time to offload their properties

According to the Business Times, subsales of the properties last year after being bought from developers in the same year indicates a steep drop in the volumes but not the price levels suggesting that speculators are holding on for higher prices.

The number of subsales dropped by 66.7%, 69.1% and 39.1% in the high end,mid tier and mass market segments respectively in 4Q07. However, the average gains made from subsales over the developer sales in 4Q07 were steady at 34% in high end (vs full year gains of 20%), 21% in mid tier ( vs full year gains of 23%) and 17% in mass market segment (vs full year gains of 16%).

We think that speculators are having a hard time to offload their properties as there are no takers. The buyers are adopting a cautious wait and watch approach resulting in a steep drop in the sales volumes. Channel checks indicate that there are cases where speculators have dropped their price expectations by 15-20% in the high end segment and yet the buyers are not purchasing.

We maintain our cautious outlook for the Singapore residential property segment especially the high end and mid tier segment. We expect the correction to be proportional to the level of subsales as a percentage of overall sales which averages to around 21.5% for the high end, 13% for the mid tier and 5.5% in the mass market in the previous two quarters.