CapitaLand Ltd. (CAPL), Southeast Asia’s biggest developer, led declines in Singapore property stocks after the government rolled out more measures to curb speculation on residential and industrial properties.
CapitaLand dropped 4.1 percent to S$3.73 at the close of trading in Singapore. The stock had its biggest drop since May 7. City Developments Ltd. (CIT), the country’s second-largest developer, sank 7.5 percent, while Wing Tai Holdings Ltd. (WINGT), the best performing property stock last year, slid 8.9 percent. The Straits Times Index’s property measure, which tracks 40 developers, lost 1.6 percent, its biggest slide since June 4.
Home prices in the island state have climbed to a record and the value of logistics buildings doubled over the past three years. Homebuyers must pay 5 percentage points to 7 percentage points more in stamp duties starting Jan. 12, the government said in a statement on Jan. 11. It also added a levy for sellers of industrial buildings and imposed a tax of as much as 15 percent if the properties are sold within a year.
The “severity of latest government measures will significantly cool investment demand, residential developers will see biggest price correction,” analysts Elaine Khoo and Gregory Lui at Deutsche Bank AG wrote in a note to clients today. The brokerage cut its rating on City Developments to “sell” from “hold” and Wing Tai’s to “hold” from “buy.”
The latest measures follow government efforts that started almost four years ago to rein in residential property prices. Those steps have included restricting interest-only loans for some housing projects and barring developers from absorbing interest payments.
To ease residential prices that climbed to a record in the fourth quarter, the government also imposed the added stamp duty for permanent residents when they buy their first home, while Singaporeans will have the levy starting with their second purchase, according to the statement.
The government will also tighten the loan-to-value limits for buyers seeking a second mortgage, it said in the statement, referring to the amount they are allowed to borrow relative to the value of their properties. The cash down payment will also rise to 25 percent from 10 percent starting from the second loan, it said.
“I think these measures are likely to have a lot more teeth than anything we’ve seen so far,” Piyush Gupta, chief executive officer at DBS Group Holdings Ltd., Singapore’s biggest bank by assets, told reporters today. “It is tough to call how much the slowdown will be, but my own sense is that we might see a 10 to 20 percent slowdown in the mortgage market.”
The city’s residential values rose for four straight years, adding 2.8 percent in 2012, government data (URPIPRCA:US) show.
Singapore will also cap bank loan repayments for public housing to 30 percent of the buyer’s monthly income, and restrict permanent residents from subletting their entire units, it said. The size of so-called executive condominiums will be limited to 160 square meters (1,720 square feet), the government said. These apartments are offered to buyers with a household income of less than S$12,000 ($9,795) a month, according to the Housing & Development Board’s website.
At least six lawmakers discussed policies for these developments at a Parliament session today. The measures on such homes were introduced after a 4,349-square-foot penthouse unit at an executive condominium development in north-eastern Singapore was marketed at S$2.05 million, the Straits Times said.
“Those earlier plans were approved because those were the planning rules at that point of time,” National Development Minister Khaw Boon Wan said in Parliament today. “As soon as we realized that those planning rules were being taken advantage of, we fixed it and I think it should be history. By capping the size of the ECs, I think automatically the price will become more sober.”
Earlier steps taken by Singapore to ease the property market included imposing additional taxes on foreigners and companies buying properties, and moving to curb the trend of so- called shoebox apartments. In October, it restricted home-loan maturities to 35 years and required tighter loan-to-value limits for loans exceeding 30 years.
In September, Singapore said it would cap the number of homes that can be developed in suburban projects to curb the increasing trend of building shoebox apartments, or units smaller than 50 square meters.
The island state in December 2011 imposed an additional 10 percent stamp duty on foreigners and corporate entities. The levy is 3 percent for permanent residents purchasing a second home and for citizens buying their third residence. The government earlier required a 1 percent duty on the first S$180,000 of the price, 2 percent on the next S$180,000 and 3 percent for the remainder.
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