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COMMERCIAL PROPERTY | Tony Chua, Singapore
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April sales volume shows sustained residential market recovery

Jones Lang LaSalle expects conservative sales in May behind European crisis and interest rate hike.

The monthly new sales volume grew by 25% to 2,207 units in April 2010. This marked the second consecutive month of growth since transactions dipped in February when buying interests remained at bay because of Lunar New Year celebrations and government's further introduction of property-related measures. The positive growth in April can be seen as a sign of continued recovery for the residential market. The year-to-date sales volume of 6,587 units (based on 4,380 units sold in 1Q10 based on options given by developers according to URA and 2,207 transactions in April) is close to half of that achieved in the full year of 2009 (i.e. 14,752 units). However, the current month's showing is still some 20% below the last peak recorded in July 2009 when 2,772 units were transacted, according to a Jones Lang LaSalle report.

The strong performance in April's sales came largely from the Rest of Central Region (RCR) where transactions rose to 1,044 units, led by the surge in launches. Of the new launches in RCR, Waterbank at Dakota by UOL Group sold almost all of its 580 units released while the second phase of The Interlace by Capitaland sold around 60% of its 230 units released. The Core Central Region (CCR) and Outside Central Region (OCR) also showed encouraging results as previously launched units continued to be absorbed by the market. 392 units were taken up out of 252 units launched (i.e. a take-up rate of 156%) in the CCR while 771 units out of 712 units were sold (i.e. 108% take-up) in the OCR.

In the landed segment, which has been relatively quiet, was stirred by the return of buying interest which drove up April's transactions to 98 units, the highest since July 2009. Pavilion Park (Phase 2) by Allgreen Properties Ltd sold 64% of the 25 units launched while Luxus Hill (49 units) by Bukit Sembawang Estates Ltd was almost fully sold.

In the coming months, the residential market continues to face challenges en route to recovery. The sovereign debt crisis which is only beginning to unfold in Greece threatens to bring on a contagion effect in the Eurozone which may act as a drag to the nascent recovery for the global economy. The residential market, which is highly sentiment-driven, is expected to cool off for a while as market players adopt a wait-and-see attitude. Already, market sentiments have shown signs of weakening over the past few weeks.

Dr Chua Yang Liang, Head of Research South East Asia, commented, "We expect the sales volume in May to be more conservative, ranging between 800 and 1200 units; and, monthly sales volume to moderate to about 1,000 units per month thereafter on the back of the European crisis and interest rate hike. By year-end, we expect total volume to close between 13,000 and 16,000 units." In terms of pricing, affordability is likely to remain a concern given that projects that are currently doing well have a lower price quantum. "Based on these factors, the overall residential Property Price Index (PPI) is expected to expand at a moderate average rate of 1.5% to 2% per quarter going forward," he added.

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