Monday, January 14, 2013

Brace for greater impact of the barrage of new cooling measures

The private residential curbs are the most onerous.

According to OCBC, to cool the property market, authorities have implemented their most comprehensive set of property cooling measures since Sep 2009. The new measures would impact the private residential segment, public housing, ECs, and industrial properties as well.

Here's more from OCBC:

The latest private residential curbs are amongst the most onerous thus far, and consist of higher additional buyer stamp duties (ABSD) rates of 5-7 percentage points across the board, and now imposed on PRs purchasing their 1st residential property and citizens for their 2nd.

LTVs for mortgages are also lowered, with minimum cash down payment for individuals with outstanding loans raised from 10% to 25%.

Expect deeper impact versus previous rounds
Compared to previous rounds, we see the latest measures having a deeper impact on a larger cross-section of buyers, with citizens buying their first property being the only group of buyers unscathed. Higher upfront cash required from 2nd time home buyers due to the new minimum cash downpayment and LTV rules would also crimp investment demand significantly.

Caution against buying on dips
Stock prices of developers are likely to show knee jerk reactions of 3%-10% price dips but we caution against buying on weaknesses in this instance for two reasons: 

1) we see the latest set of cooling measures having a deeper and more sustained impact on demand fundamentals, and

2) the latest measures point to a strong political will to soften property prices, and we expect sustained and aggressive curbs until prices reach levels deemed acceptable. Pertinently, we note that DPM Tharman stated in an interview that the government has “assessed that prices have run too far” and that “some softening will not be a bad idea.”

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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