Property curbs push down share prices of developers

Share prices of major developers like CapitaLand and City Developments took a beating on Friday, a day after the government announced a fourth set of measures within two years to cool the property market.

City Developments share price dropped 4.6% to S$12.16 while that of CapitaLand lost 3.4% to S$3.71.

The property-cooling measures, effective on Friday, include a sharp increase in the Seller’s Stamp Duty and a lowering of the amount banks can lend to home buyers to buy a second property.

The last round of measures was introduced in August last year.

Despite the latest measures, some developers said they will go ahead with their new property launches scheduled for the year.

Buyers continued to pack private property showrooms, even after the government announced the last three sets of cooling measures.

But industry watchers believe it will be different this time.

Leong Wai Ho, senior regional economist at Barclays Capital, said: “This set of measures would have more profound impact on prices than the last three rounds.

“Yesterday’s set of measures, on a scale of 1 to 10, (the impact) will probably come in at about 7 or 8, whereas the first three rounds of measures, you could probably rank them all under a rating of three perhaps.

“I think the next set of measures, if we do see them, will probably be driven by the price action in the market from here on.

“This is a clear signal to speculators. But if they do come back, and if speculative activity does form, particular in the heartlands and in the suburban areas, then I think that trigger will be met and we could see more punitive measures.”

Reacting in a statement, Southeast Asia’s largest property developer, CapitaLand, said it plans “to proceed with business as usual and to launch 1,700 homes in Singapore this year.”

It added that “we are supportive of the Singapore government’s measures to ensure prices rise at sustainable levels, in line with economic fundamentals. The government has been consistent over the years in implementing calibrated measures to curb excessive speculation in a buoyant market. We trust that the government will similarly adopt forward-thinking and calibrated measures when the market reverses.”

City Developments, on the other hand, said that it will “assess the situation and review its strategy in the meanwhile.”

Some analysts believe developers may now shift their focus to ramping up their marketing campaigns, “perhaps….give out more valuable incentives and we may even see things like rental guarantee or even capital appreciation guarantee,” said Colliers International’s Tay Huey Ying, director (Research & Advisory).

“Besides this, we may also see developers stepping up their marketing campaigns on foreign purchases…..and any hope of raising launch prices in response to the robust sales that they’ve seen in the last 2-3 months would probably be quashed in the immediate terms,” she added.

With the latest round of measures, observers believe this will put the supply of homes in check.

They say investors who are in the market for mid- to long-term will stand to benefit the most because long-term capital appreciation for properties remains in place.

Analysts expect between 800 and 1,000 new private residential units to be sold this month on the back of the new initiatives.

Source : Channel NewsAsia – 14 Jan 2011

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