Singapore property shares plunge after government imposes cooling measures

Knife display at Daiso in SingaporeKnife display at Daiso in Singapore

Singapore property shares plunged on Friday after the government imposed fresh cooling measures on the market.

Shares of City Developments dropped 16.86 percent by 9:21 A.M. SGT, while CapitaLand, which is less dependent on the Singapore market, was off 3.77 percent. Oxley tumbled 15.85 percent and Wing Tai was off 7.88 percent.

Among the realtor shares, APAC Realty plunged 18.59 percent and PropNex was down 8.70 percent.

The measures also appeared to be weighing on banking shares, with UOB down 1.77 percent, OCBC off 1.57 percent and DBS down 2.38 percent at 9:24 A.M. SGT.

The fresh measures, which take effect on Friday, targeted the additional buyer’s stamp duty (ABSD) and loan-to-value limits.

“The sharp increase in prices, if left unchecked, could run ahead of economic fundamentals and raise the risk of a destabilising correction later, especially with rising interest rates and the strong pipeline of housing supply,” the Ministry of Finance, the Monetary Authority of Singapore and the Ministry of National Development said in a joint statement on Thursday.

RHB said in a note on Friday that it believed the new cooling measures would likely impact transaction volumes and prices overall.

“We are of the view that this unexpected negative surprise will spook the property market,” RHB said. “We deem this set of demand-side measures as ‘very stringent’ and a pre-emptive one, which will have a negative effect on buying sentiment, as well as slowing down property demand and prices in the near term.”

It said it expected high-end properties would take a bigger hit as the measures target higher ABSD for second property purchases and includes all foreign buyers; RHB said that anecdotally, it estimated investment demand accounted for around 30-40 percent of overall demand, with the proportion higher at the high end, while foreigners also tend to target the high end.

RHB said it was putting its forecast of 5-10 percent property price increases this year and next under review.

In a separate note, RHB said it expected banks would face mortgage weakness from the cooling measures, although it said the impact on housing loan growth for the next few quarters would be muted as most of those loans had been approved earlier.

“Amongst the three banks, UOB has the highest exposure to housing loans, at 27.6 percent of its total loans. DBS has the least exposure, at 22.1 percent of its loans. It would appear the measures are more negative for UOB than DBS,” RHB said.

But it added, the short-term weakness in banks was an opportunity to buy as the longer term view remained positive, with rising U.S. interest rates set to boost net interest margins in Singapore.

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