Prop­erty cool­ing mea­sures cre­ate short-term shock

Southeast Asia Globe - - Banking -

The value of bank and real es­tate stocks in Sin­ga­pore are tak­ing a hit with the an­nounce­ment of real es­tate cool­ing mea­sures by the cen­tral bank. The changes, which kicked in on 6 July, in­clude a tight­en­ing of loan-to-value lim­its and higher rates of ad­di­tional buyer’s stamp duty. They are aimed at con­trol­ling a quickly ris­ing prop­erty mar­ket – which the cen­tral bank saw as “eu­phoric” – in an ef­fort to lower the risk of a real es­tate bub­ble, mort­gage loan losses and price shocks down the road.

An­a­lysts fore­cast a down­turn in the short term but stronger fu­ture re­turns: “Look­ing at the news, it’s likely to take the mar­ket a lit­tle by sur­prise, par­tic­u­larly with the broad ex­pec­ta­tion for prop­erty prices to re­main on the rise through to the end of the year,” said IG Asia’s Jingyi Pan, in Sin­ga­pore. “As with pre­vi­ous it­er­a­tions, it does re­main to [be seen] whether it re­tains longer-term im­pact [in] the cur­rent en­vi­ron­ment.”

“We ex­pect that the new mea­sures will dampen bank loans for res­i­den­tial prop­erty pur­chases and the resur­gence of in­vest­ment and spec­u­la­tive pur­chas­ing,” said Si­mon Chen of Moody’s In­vestors Ser­vice. “We also ex­pect the mea­sures will im­prove banks’ newly orig­i­nated hous­ing loans as­set qual­ity amid Sin­ga­pore’s ris­ing in­ter­est rate en­vi­ron­ment and strong sup­ply pipe­line.”

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