Home sales fall after cooling measures

Several analysts have warned investors to exercise caution when dealing with shares of companies that are highly exposed in the residential market, given the expected decline in home sales this September due to the impact of the cooling measures introduced by the government at end-August.

However, some analysts have given clear estimates of the effect of the cooling measures on selling prices.

Their statement came after figures from the URA showed that the number of new private homes sold last month dropped 19 percent to 1,248 units over the previous month.

The sales figures were achieved despite of the Hungry Ghost month, which also fell in the same month. Property buyers tend to avoid acquiring properties during the period, which become inauspicious.

The sales volume does not take into account the government’s anti-speculative measures’ impact in the property market, which was implemented on August 30.

Global banking group BNP Paribas said the new anti-speculative measures could help reduce speculation in the Singapore property market, as well as reduce investment purchases made. The bank is targeting a price correction of up to 10 percent.

“The measures are likely to impact the upgraders' segment, which is priced below $1,000 psf,” said analyst Pang Chin Hong.

With property prices likely to cool, stocks of property developer are unlikely to perform in the market.

“They are likely to be range-bound between 10 percent and 30 percent discount to revised net asset value for big-caps,” said Mr. Pang.

Morgan Stanley also said in a client note that among the large-cap stocks, CDL is expected to take the biggest hit from the cooling measures since 43 percent of its gross asset value comes from the residential sector.

“Residential-focused stocks are likely to remain muted as investors wait for September sales figures to better gauge the impact of the government's recent property measures,” said analysts Wilson Ng and Brian Wee in the report.

RBS also warned CDL, and mentioned that private home sales are likely to decline in the short period or “risk further government intervention”.

“In the medium to long term, slower immigration should result in markedly slower primary volumes,” said analyst Fera Wirawan.