Singapore Tightens Loan Limits to Cool Housing Market

Singapore increased down payments for second mortgages and imposed a stamp duty on property held for less than three years to curb speculation after home prices surged 38 percent in the second quarter.


Buyers who hold more than one mortgage can only borrow up to 70 percent of a property’s value, versus 80 percent previously, and must pay 10 percent in cash, up from 5 percent, the government said in a statement today. A seller’s stamp duty will apply to all residential units and land sold within three years of purchase, from one year. The changes take effect today.

Singapore joins Hong Kong and China in introducing measures this year to cool their property markets amid concerns that asset bubbles are forming as home prices surge. Hong Kong said this month it will tighten mortgage lending rules and increase the supply of land, while China’s restrictions include higher down payments and mortgage rates for multiple-home buyers.

“The government is taking a preemptive approach to make sure prices don’t get out of hand,” said Donald Han, a Singapore-based managing director at real estate adviser Cushman & Wakefield Inc. “Most of the measures are really targeting repeat buyers and speculators who buy and sell over the short term, which is now defined as within three years.”

Stocks, Bonds

CapitaLand Ltd., Southeast Asia’s biggest developer, dropped 1 percent to S$3.96 as of 1:15 p.m. in Singapore trading, while the benchmark Straits Times Index rose 0.6 percent. City Developments Ltd., the island’s second-largest developer by market value, fell 3.2 percent to S$11.58, headed for its biggest decline since February.

CapitaLand’s S$250 million ($185 million) in 4.35 percent notes due 2019 fell to 101.88 cents on the dollar from 102.48 cents on Aug. 27, the lowest in about two weeks, according to Standard Chartered Plc prices. City Developments’ S$90 million in 2.92 percent notes due 2014 fell to 101.68 cents, the lowest since Aug. 10, according to DBS Group Holdings Ltd.

Property prices have surged as Singapore’s $182 billion economy rebounded from last year’s global slump to expand at a record 17.9 percent pace in the six months through June.

The city-state has been attempting to rein in home prices since last year when the government barred interest-only loans for some housing projects and stopped allowing developers to absorb interest payments for apartments still being built.

Previous Measures

The government in February said it will levy a seller’s stamp duty on all residential properties and land that are sold within one year from the date of purchase. The city-state then also lowered the loan-to-value limit to 80 percent from 90 percent for all housing loans provided by financial institutions regulated by the Monetary Authority of Singapore.

The island nation’s Prime Minister Lee Hsien Loong yesterday said previous measures failed to keep prices in check.

“We twice attempted to cool the property market, once last year and once in February this year, but the prices are still rising,” Lee said in a televised speech. “Our purpose is to make sure in the long term, Singaporeans can own their homes and afford it and it will be a gradually appreciating asset which will grow as Singapore grows.”

Singapore’s property market would form a bubble if the current momentum continued, Mah Bow Tan, Minister of National Development, said today after the measures.

Prices Surge

“The property market is currently very buoyant,” the government said in the latest statement. “The government’s objective is to ensure a stable and sustainable property market where prices move in line with economic fundamentals.”

Singapore private residential prices rose 38 percent in the second quarter from a year earlier, according to the Urban Redevelopment Authority.

The island led 36 markets around the world in property- value changes last quarter, gaining 34 percent from a year earlier, according to the Global Property Guide in its survey of house prices.

Price levels have exceeded the historical peak in the second quarter of 1996, the government said today.

The government expects gross domestic product to grow 13 percent to 15 percent this year after the nation in 2009 exited its worst recession since independence 45 years ago.

‘Severe Implications’

“Should economic growth falter and the market corrects, property buyers could face capital losses, with implications on their own finances and the economy as a whole,” the government said. “Moreover, the current low global interest rate environment will not continue indefinitely, and higher interest rates could have severe implications for buyers who have overextended themselves.”

Hong Kong Aug. 13 raised down payments for apartments costing HK$12 million ($1.54 million) or more to 40 percent, from 30 percent. The government has been accelerating its auctions of land for development in a bid to cool prices that have soared about 45 percent since the beginning of 2009, boosted by mortgage rates at the lowest in two decades and buying by mainland Chinese.

John Tsang, Hong Kong’s financial secretary, said home prices are approaching the level of 1997, the height of a previous bubble that was followed by a six-year slump.

China, South Korea

In China, the banking regulator has ordered stress tests for lenders to gauge the impact of home prices falling as much as 60 percent in the hardest-hit markets, a person with knowledge of the matter said. China’s property prices rose at the slowest pace in six months in July as the government cracked down on speculation to prevent asset bubbles.

China has restricted pre-sales by developers, curbed loans for third-home purchases, raised minimum mortgage rates and tightened down-payment requirements for multiple-home purchases. It has also instructed lenders to halt third-home loans in areas with “excessive price gains.”

Taiwan in June introduced a 70 percent cap on loans for second homes, after low borrowing costs fueled lending and a jump in home prices. Central Bank Governor Perng Fai-nan wrote to the chairmen of all financial institutions on the island last month, asking them to take steps to prevent housing speculation.

Malaysia’s central bank has written to financial institutions to get their feedback on the possibility of capping the loan-to-value ratio for mortgages at 80 percent, the Edge weekly reported Aug. 28, citing unidentified people familiar with the matter.

South Korea may be an exception in Asia as the government steps up measures to spur the property market. The government yesterday said it will ease mortgage lending rules and extend tax breaks to encourage buyers back after home sales slumped to the lowest level in almost a year and a half.

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net; Joyce Koh in Singapore at jkoh38@bloomberg.net

Singapore moves to cool property market

Written by Thomson Reuters


Monday, 30 August 2010 10:09

Singapore on Monday announced restrictions on people buying second homes as part of new measures to cool its residential property market, hurting property stocks.

The new measures, which take immediate effect, include decreasing the amount people can borrow to buy second properties to 70% from 80 perent, as well as extending a stamp duty on sellers who buy and sell within three years.

CapitaLand Ltd - Deutsche Bank

Ascott Residence Trust (ART SP) will acquire 28 assets in Europe (17 in France) and 1 each in SG & Vietnam. The Ascott (100% owned by Capl) will concurrently purchase ART's stake in Ascott Beijing for S$214m and reposition it for future strata sale. The acquisition will be funded by a fully underwritten issuance of 487.5m new units by ART (proceeds of S$561m), additional debt & divestment proceeds subject to unitholders approval.

Developer-sponsor model at work - Macquarie

Event


 CapitaLand announced the proposed divestment of 28 serviced residence properties, mainly in Europe, to its 47.7%-owned listed associate Ascott Residence Trust (ART SP, S$1.23, Neutral, TP: S$1.20) for S$970m. This is consistent with its strategy to divest stabilised assets to its listed REIT
vehicles. Net cash proceeds of S$332m will be used to capture new investment opportunities. Outperform maintained.impact

 Transaction highlights. The EBITDA yield of the assets to be divested is circa 5.7% vs ART’s current EBITDA yield of 5.5%. ART will fund via a combination of equity and debt and expects DPU accretion in FY11 of 3.0% to 6.6%, depending on the price of the equity to be raised. CapitaLand will subscribe to ART’s fund-raising to maintain its 47.7% stake.

 Acquiring Ascott Beijing from ART. CapitaLand will pay S$214m for this asset with GFA of 64,155 sqm at Rmb23,000/sqm. The group intends toenhance and re-position the asset for future strata-title sale as residential units. Selling prices for new projects in the Chaoyang district are in excess of Rmb40,000/sqm, although the selling price for CapitaLand will have to be adjusted for shorter length of lease left and taxes.

 Small net gain at group level but lowers gearing at The Ascott Limited (TAL). CapitaLand will realise a gain of S$52m on completion of the divestment expected by year-end. More importantly, the transaction will lower TAL’s gearing from 60% to 27%, providing this SBU with financial capacity to help reach its target of growing its portfolio from 26,546 units currently to 40,000 units by 2015.

Earnings and target price revision

 No change to EPS forecasts and no change to target price.

Price catalyst

 12-month price target: S$4.80 based on a Sum of Parts methodology.
 Catalyst: Further investments in the retail, residential and serviced apartment sectors over the next six months. Action and recommendation

 We believe CapitaLand’s businesses are firing on all cylinders. With a low gearing of 28%, we expect new investments in its key retail, residential and serviced apartment SBUs to help drive RNAV expansion. The shares are trading at a 24% discount to our RNAV of S$5.34. Outperform with potential upside in excess of 20%.

Singapore new home sales likely muted rest of year

Written by The Edge


Tuesday, 17 August 2010 09:22

Spike in new private home sales in Singapore last month unlikely to be repeated in coming months, analysts told Dow Jones.

According to new government data, developers sold 1,544 new homes in July vs 847 in June, launched 1,335 units vs June’s 1,010.

“We believe this was driven by developers who pushed out projects to catch the demand prior to the typical slowdown experienced during the Lunar Hungry Ghost Month, when buyers are less keen to purchase large-ticket items,” says Morgan Stanley. BNP Paribas expects sales this month to be muted, tips monthly sales to hover around 1,000 homes from September.

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