Goldman Sachs - Real Estate - A glance at residential sales and unsold backlog across Asia

Goldman Sachs - A glance at residential sales and unsold backlog across Asia

Pick-up in residential transaction volume across Asia
We have witnessed a steady improvement in residential sales volume across different Asian cities in recent months, though physical price performance has been mixed. Continuous volume pick-up helps clear unsold backlog and supports our recent valuation and rating upgrades for selective developer stocks in the region, especially China developers.

The sequential improvement is stronger in China
Arguably, the increase in residential sales since the beginning of the year was partly due to seasonality because March-May is the traditional sales season for Asia’s residential markets. However, it is important to note that the 12-month rolling average monthly take-up, which helps correct seasonality in the data series, also showed a steady rising trend for most Asian cities (except Hong Kong and Tokyo) in our coverage universe and this positive trend is slightly longer in Mainland China.

Number of inventory months is falling
When one compares the unsold inventory with the 12-month rolling monthly take-up, one will realize that the major cities in Mainland China, especially Shenzhen and Guangzhou, have seen a sharp reduction in the number of months required to clear their unsold backlog. Singapore also demonstrated a similar trend, though the absolute number of unsold units is substantial. Hong Kong tended to be in the minority and recorded a higher number of inventory months in 1Q09, but the absolute level of unsold backlog is still low.

Key risk
Further deterioration of macroeconomic outlook and unexpected government policies