Crackdown hurts developer stocks
S i ngapore’s
renewed clampdown on speculative property demand sent real estate stocks reeling yesterday.
The tightened rules, rolled out a day after the central bank noted “euphoria” in the property market, sharply increase buyers’ stamp duties for entities such as developers.
Singapore’s benchmark Straits Times Index dropped 2% yesterday as property developers and banks led declines, with City Developments Ltd and UOL Group Ltd sliding more than 13% each.
As major property markets from New York to Sydney show signs of cooling, Singapore and Hong Kong prices are on a tear, causing unease among local policymakers.
In Singapore, a sudden rebound in speculative demand, stoked by record land bids and redevelopment deals, threatened to undo years of carefully implemented curbs that had given the city-state an edge over Hong Kong in quality of living.
“This is a preemptive move by the government to cool down the market before it gets too hot,” Irvin Seah, an economist at DBS Group Holdings Ltd, said in an interview.
The en-bloc market, where a group of owners band together to sell a collection of apartments, surged in recent months thanks to demand from developers.
Officials had repeatedly warned that such exuberance was unsustainable, and Ravi Menon, managing director of the Monetary Authority of Singapore, sounded a cautious note on en-bloc developments on Wednesday.
“With the latest curbs, the en-bloc market is potentially grinding to a halt,” DBS analysts led by Derek Tan wrote in a report.
Individuals taking up their first housing loan will face tighter borrowing limits under the new rules, meaning they have to put up more cash to buy property.
“For foreign purchases of residential property, the additional buyer’s stamp duty increases to 20% from 15%, while for Singapore citizens the extra charges apply only from their second home purchase,’’ the MAS, Ministry of National Development, and Ministry of Finance said in a joint statement on Thursday.
For entities buying any residential properties for development, the additional buyer’s stamp duty rises by 10 percentage points to 25%, with a further five percentage points imposed for developers.
An index tracking private residential prices jumped 3.4% in the three months ended June 30, according to a flash estimate from the Urban Redevelopment Authority this week.
The rebound i n home prices has prompted aggressive land bids from developers. The government in February raised taxes on home purchases exceeding S$1 million (US$730,000) as collective apartment sales rose.