Weak interest seen for developer shares in Singapore.
Stock pickers are shunning home builders in favour of Singapore real estate investment trusts (S-REITs) following the imposition of new real estate curbs in July, reported Bloomberg.
“The market had not expected the severity of the measures announced,” said Vijay Natarajan, an analyst with RHB Research Institute Singapore. As such, there is weak interest in the shares of developers, while investments in the private residential market have shifted to other sectors.
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For most of last year and in the first half of 2018, stock prices of local property developers rallied. Coupled with appreciating prices and growing sales, these signs indicated that the city-state’s private housing market was on the rebound.
But in a surprise move, the government introduced new cooling measures on 6 July. These included tighter loan-to-value (LTV) ratios that compel home buyers to fork out more cash when buying a home. For foreigners purchasing homes here, the Additional Buyer’s Stamp Duty (ABSD) was raised from 15 percent to 20 percent.
These are going to drag down home sales and prices, noted Jefferies Singapore analyst Krishna Guha, adding that home builders may slash private condo prices by up to 10 percent due to the new curbs.
“Developer stocks are subject to high policy risk,” noted Bloomberg Intelligence analysts Patrick Wong.
In fact, an index that tracks home builders has fallen 5.4 percent since 5 July, even though it saw the highest five-year increase in 2017. On the other hand, that for S-REITs edged up by 0.7 percent during the same period.
“Real estate investment demand will further concentrate on the commercial market and support the growth in capital value of commercial properties owned by major landlords,” Wong added.
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Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email email@example.com