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.

Wing Tai, CityDev fall on government moves

Written by Thomson Reuters


Monday, 30 August 2010 15:53

Shares of property developers Wing Tai Holdings (WTHS.SI) and City Developments (CTDM.SI) fell more than 4% after the Singapore government announced measures to cool the residential property market.

Wing Tai and City Developments have relatively greater exposures to the mass residential segment of the market.

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.

Property: Pre-sales momentum bounces back in Jul

By Meenal Kumar


Tue, 17 Aug 2010, 09:09:44 SGT

After a quiet Jun, developers seemed to have stepped up activity ahead of the traditionally slower month-long Hungry Ghost festival period (10 Aug to 07 Sep). Launches of non-landed property units rose to 1322 units (+33.4% MoM) for Jul 2010, the highest since Apr. The launches were well-received, with Jul pre-sales increasing a whopping 88.7% MoM to 1517 units. The monthly take-up rate of 114.8% was not only the highest for the year but also beat Nov and Dec 2009 levels. Looking to Aug, launch activity is likely to be comparatively more muted during the Hungry Ghost period. Sep could be another activity-heavy month, though, with projects including City Developments’ 642-unit NV Residences slated for a 3Q10 launch. While property developers have recently reported strong 2Q CY2010 earnings and offered sanguine outlooks for 2H10; we note that anecdotally buying sentiment seems more cautious – but still very active. With a change in analyst coverage, our ratings for the property companies under our coverage are under review. Maintain NEUTRAL on the broader property sector.

Venturing into China - Citi

Results largely in line. For 2Q10, CityDev reported a net profit of S$165m,

reflecting an 18% rise qoq. Including the 1Q net profit of S$139m, 1H10 earnings
are S$304m. This is equivalent to 47% of consensus estimates of S$642m and
49% of our estimate of S$623m for FY10.

 Property development led growth. By segments, property development continues to
be the main driver of profit before tax, contributing over 60% of the total PBT.
Profits were booked for Cliveden, One Shenton, The Arte, Wilkie Studio, Shelford
Suites, Tribeca and The Residences at W. Both Tribeca and The Arte were
completed in 2Q10.

 Sales update and impending launches. In 1H10, the group sold a total of 773 units
amounting to sales value of S$0.95bil. Year-to-date (9 Aug), they have sold 934
units with sales value of S$1.2bil. The key contribution in the last month came
from the sold-out 368 Thomson (157 units). CityDev plans to launch 2 projects in
3Q10: the 642-unit NV Residences located in Pasir Ris and the redevelopment of
Copthorne Orchid (150 units). As for its other luxury-end landbank, management
is of the view that 2011 would be a better time to launch luxury projects.

 Venturing into China. City Devt will invest an initial S$300m to set up its presence
in various cities throughout China. Mr Sherman Kwek has been appointed as the
CEO of CDL China Limited to lead this initiative.

 Sell rating maintained for valuation reasons, TP at S$9.80 (from S$9.60). We are
leaving our estimates largely unchanged for 10/11E but have raised our RNAV and
TP to S$9.33 and S$9.80 respectively to reflect the higher valuation of M&C and
slightly higher selling price of its mass market projects.

City Developments - Eyeing a foothold in China - Kim Eng

Event

􀂃 City Developments (CDL) reported a 1H10 PATMI of $304m, a 36%
yoy improvement, led by robust property development profits. The
results are largely in line with our expectations and we anticipate
even stronger earnings in 2H10, as at least two development projects
will start to contribute to earnings. CDL has also set up a company to
look into investment opportunities in China. Maintain BUY.



Our View

􀂃 Property development continued to be the mainstay of the group,
contributing about 53% of 1H10’s pre‐tax profit. The profits from
three sold‐out or substantially sold‐out projects have yet to be
recognised; we estimate that at least two should feature in 2H10.

􀂃 The hotel business under Millennium & Copthorne is showing strong
signs of recovery, buoyed by RevPAR growth of 33% yoy in Singapore.
The 150‐unit freehold condominium on the site of the existing
Copthorne Orchid Singapore hotel is expected to be launched next
month. We estimate an ASP of $1,700 psf, which could mean an
accretion of 6 cents a share to CDL’s RNAV from the development
profits.

􀂃 A new subsidiary, CDL China Limited (CDLCL), has been set up to drive
CDL’s expansion in China. CDLCL has an initial capital of $300m to
look for investment opportunities in Tier 1 and 2 cities, ranging from
residential to commercial developments. Nevertheless, Singapore is
expected to remain CDL’s key focus in the short‐to‐medium term.

CityDev - OCBC Investment Research(Morning Call)

City Developments Ltd: Buoyed by property development


City Developments Ltd (CDL) reported a 19.6% YoY and 25.5% QoQ

increase in 2Q10 revenue to S$941.7m. CDL enjoyed contributions from

projects including the Cliveden, One Shenton, The Arte, Tribeca, Livia,

and The Gale. PATMI of S$164.6m was up 17.6% YoY and 18.1% QoQ.

Property development was the star performer, contributing more than 50%

to CDL's profit before tax for the quarter. CDL's hotel operations were the

second key profit contributor, boosted by the recovery in the hospitality

sector. Its results were also uplifted by the recognition of a gain on disposal

of The Office Chamber in 2Q10. CDL has enjoyed strong pre-sales at projects

including Hundred Trees (396 units), Volari at Balmoral (85 units) and 386

Thomson (157 units). Profits from these sales have yet to be recognized.

Contributions from such projects should underpin earnings in the coming

quarters, even as CDL plans new launches. We will be attending an analyst

briefing later this morning. With a change in analyst coverage, we are placing

our previous HOLD rating and S$11.16 fair value UNDER REVIEW. (Meenal

Kumar)