SINGAPORE – As widely anticipated, Singapore-listed property and bank stocks were hit on Thursday after the Government unveiled a fresh round of property cooling measures.
At the close of trading on Thursday, City Developments (CDL) had dropped 5.6 per cent to $6.91, while PropNex was down 6.51 per cent to $2.01, and Apac Realty dipped 3.59 per cent to 60 cents. Ho Bee Land lost 0.92 per cent to close at $2.15.
While property stocks were in the first line of fire, banks, which depend hugely on net interest margins (NIMs) for their bottom line, were also affected. A significant component of NIM is dependent on property loans.
UOB chief executive Wee Ee Cheong said at the bank’s results briefing on Thursday that he expects the bank’s home loan portfolio to stay resilient despite the latest stamp duty hikes, as “close to 80 per cent of our loan books are owner-occupied”.
Bank shares recovered from their morning lows by the end of the trading day.
UOB shares fell 0.51 per cent to $29.11 at the closing bell, while OCBC Bank dipped 0.24 per cent to $12.57. But DBS Bank edged up 0.18 per cent to $32.76.
With banks accounting for 46 per cent of the Straits Times Index, the benchmark was down 11.88 points or 0.36 per cent to 3,282.03 points. It had earlier hit a low at 3,271.31 points.
All this follows drastic new property curbs announced close to midnight on Wednesday. The Ministry of Finance, Ministry of National Development and Monetary Authority of Singapore surprised the market by announcing that for Singapore citizens, the additional buyer’s stamp duty (ABSD) for the purchase of their second property will be raised to 20 per cent from 17 per cent, and to 30 per cent from 25 per cent for their third and subsequent properties.
Singapore permanent residents will see the ABSD raised from 25 per cent to 30 per cent for their second property, and from 30 per cent to 35 per cent for their third and subsequent properties.
Foreigners bear the brunt of the increases, with ABSD on any property purchase doubled from 30 per cent to 60 per cent. A 65 per cent rate will apply to residential properties bought by entities or in trust, up from 35 per cent. The new rates took effect on Thursday.
Analysts expressed surprise not at the measures, but at the magnitude of the measures.
“While regional property markets have been adjusting to the rising interest rate environment, Singapore property prices have just been running up,” said Ms Carmen Lee, head of OCBC Investment Research.
She added: “This just cannot go on. That said, the moves were quite harsh, especially on foreign buyers. I think properties in the $6 million and higher categories will be particularly hit, as these are the types of properties that foreigners go for here. The mass market home buying by Singaporeans and permanent residents will be largely unaffected.”
The magnitude of the impact of the latest measures is still being debated.
Analysts and market insiders noted that foreign demand is also based on factors such as political and social stability, and the law and governance within the market where the purchases are made – and Singapore gets top billing on many of these factors in Asia.
Market insiders noted that investment demand from high-net-worth buyers has been relatively inelastic, and historically, such measures (in 2011, 2013, 2018 and 2021) have only led to a moderating effect and not a significant price deceleration.
Meanwhile, local employment rates continue to be healthy and wages have grown in real terms over the last decade.
“This seems a pre-emptive attempt at managing investment demand,” said Mr Thilan Wickramasinghe, head of research at Maybank.
He added: “However, high-net-worth investment buyers have shown (themselves) to be relatively price-inelastic during past measures, resulting in more of a moderating effect than a significant price deceleration.
“Overall, we expect residential prices and rents to slow this year, given the combined impact of higher mortgage rates, slowing economic growth and the impending completion of around 20,000 private units.”
Maybank reckons that the impact may also be seen in the launch timeline of new projects (about 10,000 to 12,000 units) as market participants factor in new measures, which may result in lower primary sales for the year.
In a report released on Thursday morning, capital markets company CLSA downgraded CDL.
“While the timing of this measure is a surprise to us, it is not totally unexpected, given that the latest flash estimates suggest price growth is running at a rate ahead of the Government’s comfort zone,” wrote CLSA analyst Wong Yew Kiang.
”We expect prices to contract by 5 per cent and 3 per cent in 2023 and 2024 (respectively) versus our previous assumption of a 5 per cent contraction in 2023 and flat in 2024. In tandem, we lower our target price for City Developments from $9.86 to $6.68 and downgrade our recommendation from ‘buy’ to ‘sell’.”
More such calls are expected in the days ahead.
But analysts also say not all property-based plays will suffer as a result of these curbs.
For one thing, commercial properties will not be impacted by the new ABSD. So foreign demand could shift to shophouses and other commercial properties.
Meanwhile, property players in the long-stay rental segment, such as LHN and Ascott, could also benefit from increased demand for rental properties if foreigners decide to rent rather than buy, reckon some market insiders.
LHN, which operates co-living apartments under the label of Coliwoo, has been steadily increasing its footprint in Singapore, with its purchase of GSM Building in Middle Road for $80 million and recently launched Coliwoo Orchard. The company has almost 1,500 keys – with keys being a measure of room numbers – and expects to hit 2,500 keys by end-2023.
Ascott’s Lyf has been one of the fastest growing global players in its business, with a footprint growing through Asia and beyond.
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