Property stocks fall in wake of govt measures

http://www.straitstimes.com/Money/St...ry_493665.html

Feb 23, 2010

Property stocks fall in wake of govt measures

FTSE ST Real Estate Index down 7.30 points to close at 629.40

By Joyce Teo, Property Correspondent


PROPERTY shares fell yesterday in the wake of Government steps to cool the real estate market although buyers were still out in force at the weekend.

Losses were felt across the board with industry leaders CapitaLand down 14 cents to $3.76, City Developments off 52 cents to $10.30 and Keppel Land down seven cents to $3.30. Wing Tai fell nine cents to $1.68.

Among the smaller firms, Ho Bee closed six cents down at $1.69, GuocoLand inched down two cents to $2.01. Allgreen shares dipped by just one cent to $1.13.

The FTSE ST Real Estate Index lost 7.30 points to close at 629.40.

Investors bailed out of the sector after the Government announced two measures last Friday evening to let some air out of a potential property bubble.

A stamp duty to deter short-term speculators will require sellers to pay a levy of about 3 per cent if they offload a property within a year of purchase.

The Government also lowered the loan-to-value limit of housing loans from 90 per cent to 80 per cent. This means buyers will have to fork out more downpayment to buy a property.

National Development Minister Mah Bow Tan said on Sunday that there was 'high risk' of a bubble forming and it was acting now with a small step, rather than later when harsher ones may be needed.

Some analysts saw yesterday's selldown as a knee-jerk reaction that has created buying opportunities.

A DMG & Partners Securities report said the Government's actions reflect 'a very cautious approach and strike a more serious tone' as compared with the market-cooling measures last September.

It reckoned the measures came out so quickly because the Government's confirmed list sales method - which increases supply as sites are tendered out according to a schedule - appears ineffective.

Developers have continued to bid aggressively for sites, with prices that suggest they may have to sell for 10 per cent to 30 per cent more than completed neighbouring projects.

HDB resale prices are also at a record high and still rising, despite increased supply of build-to-order flats.

DMG said the sector-wide kneejerk correction of share prices may last for more than a day and is likely to have a greater impact on developers with higher exposure to the mass market sector.

It continues to favour the shares of high-end developers, as it sees them prospering on the back of the better economy, potential for higher prices for their flats and relatively more attractive valuations.

OCBC Investment Research is also relatively upbeat. It said the impact of the moves may not as be as significant as the cooling measures put in last September.

'We believe the pre-emptive measures are to prevent more people from speculating...when (the market) continues to pick up for the rest of the year,' it said.

'Despite the measures, our fundamental view...remains unchanged as we believe that genuine demand will not be affected and interest from foreigners will continue to drive demand higher.'

But some are not as optimistic.

'If the measures have minimal impact, it heightens the policy risk and potential impact from future policies; if the measures work better than expected, valuations would decline,' said a DBS report.

An analyst who declined to be named told The Straits Times: 'There is negligible impact from the measures alone, but clearly the message is that there will be more measures if volumes and prices continue to shoot up.'

He said the Government is clearly concerned about the entire residential market as it mentioned the January sales spike of new, private homes as one danger sign. Nearly half of the sales were in prime areas.

Unless you are a really long-term investor, it is risky to start buying property stocks, he said.

Meanwhile, Far East Organization said visitorship was hit but keen buyers were mostly undeterred.

Wing Tai said it sold more than 70 per cent of the 48 flats released at the 147-unit L'viv in Newton Road at the weekend at an average of $2,000 per sq ft, or $1.25 million to $2.3 million for units ranging from 614 sq ft to 1,001 sq ft.

'Our L'viv clientele are genuine buyers seeking...long-term value; hence the new rules do not seem to have affected (them),' said a Wing Tai spokesman.

An industry observer said small projects, particularly those packed with compact units and in suburban areas, are likely to feel the heat from the measures.

'Speculators do go for these smaller units as they are easier to flip,' he said.

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http://www.businesstimes.com.sg/sub/...73594,00.html?

Published February 23, 2010

Anti-speculation moves dent property counters

Capital gains tax could be next, says RBS, since govt keen to avoid bubble

By OH BOON PING


(SINGAPORE) Singapore property counters took a hit yesterday, after the government's latest moves to quell speculation.

CapitaLand lost 14 cents to $3.76, City Developments fell 52 cents to $10.30, and Keppel Land slipped 7 cents to $3.30.

The falls came after the government last week introduced a seller's stamp duty (SSD) on all residential land and property bought after Feb 19 and sold within a year, and cut the loan-to- value (LTV) limit for all private housing loans to 80 per cent, from 90 per cent.

Citi economist Kit Wei Zheng believes the impact of the lower LTV ratio will be limited, since fewer than 10 per cent of housing loans are granted at an LTV of more than 80 per cent.

And the SSD, designed to discourage the marginal would-be speculators, 'is clearly less drastic than similar measures implemented in 1996, when the minimum holding period was three years', he said.

'One can also argue that the seller stamp duty rate - 3 per cent minus $5,400 - is not large enough to act as a serious deterrent at this stage.'

Still, Citi considers the moves prudent, since high sales in prime districts 'raise the possibility that buyers of such units could be highly-leveraged middle income households buying for investment or speculative purposes, rather than genuine first-time home buyers'.

'Although households have been deleveraging since 2003, the recent surge in property transactions and mortgage lending would probably be of concern to regulators,' Citi says.

'Thus, it is not just from a political but also prudential perspective that the government may have decided to act quickly in the latest episode.'

Royal Bank of Scotland (RBS) thinks property gains tax could be next, as the government has stated that more measures will be implemented if necessary to prevent a property bubble.

These tools include tweaking credit rules, and land supply and tax policies in extreme cases.

'Given that supply and credit rules have been tweaked, we believe property gains tax is next, albeit at rates lower than implemented in 1996. This is because the government hopes to introduce calibrated measures to avoid a crash in the property market.'

DMG believes the fundamentals and outlook for Singapore property remain healthy, especially in the high-end segment.

'Our mid-cap and small-cap top picks within the overweight property sector remain Wing Tai and SC Global respectively,' it says.

On the economics front, Citi feels the first quarter was mixed, with disappointing non-oil domestic exports (NODX) and a continued recovery in services coupled with official caution over the second-half outlook.

Indicators to look out for include NODX and industrial production momentum, tourism activity (especially from the opening of the integrated resorts), and wage and imported inflation pressures.

Citi also feels the Singapore dollar may have limited room to appreciate, given the US dollar's strength, even though an unwinding of short euro positions could drive the euro up in the near term, in turn allowing the Sing dollar to strengthen in a similar time frame.

'At the same time, the pressure for MAS to tighten in April has likely eased, though we would still expect it to tighten by October at the latest,' it says.

'In any case, any downward pressure on US$-S$ from MAS tightening would probably be limited, given the S$ net effective exchange rate (NEER) is already at the strong side of the policy band, while a change in slope allows for only incremental gains in the S$ NEER in the near term.'