Here's why November's developer sales rebound will be short-lived

December and 2014 volumes predicted to decline.

Barclays Research said developer monthly sales rebounded in November as widely expected, but noted that this could be the best it could get for a while with December sales expected to dip again, moving to a subdued momentum in 2014.

November primary private home sales in Singapore rose 15% m/m to 1,228 units, according to Urban Redevelopment Authority (URA) data, as developers started cutting prices by c8-10% for select launches. Half of the sales were contributed by new launch Duo Residences, an integrated project at Ophir Road that is being developed by M+S (a joint venture between the Malaysian and Singapore governments), which sold 600 of its 660 total units at a S$1,999psf median price.

This latest data brings 11M13 developer sales to 14,678 units, 30% below the 20,880 units sold in 11M12, on track to hit our forecast of 15,500 units this year, said Barclays.

"We expect December volumes to decline sequentially and for 2014 volumes to remain subdued as the Total Debt Servicing Ratio (TDSR) rules in place since June 2013 continue to bite and also as buyers get cautious on a looming oversupply situation. We maintain our negative stance on the Singapore residential sector as we expect prices to fall 20% by 2015 as interest rates rise, coinciding with peak supply, and the vacancy rate could reach an unprecedented 10% by 2016," it added.

Barclays said SREITs and real estate developers in Singapore have largely been weighed down by the tapering prospect and rising interest rate fears – having declined 12% YTD in absolute terms and underperforming the general Singapore STI index by 8%. But when interest rates actually start rising, REITs could start to outperform again, said the research firm.

Also Barclays notes that their global equities strategy advocates "buy the laggards", suggesting in summary to overweight "value" and underweight "quality". Top picks include CapitaCommercial Trust (CCT) and Keppel REIT (KREIT).

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