Property cooling measures create short-term shock
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.”