SINGAPORE: Property and bankingshares in Singapore came under heavy selling on Friday (Jul 6), with some hitting multi-year lows, as investors reacted to unexpected news of fresh cooling measures announced a day earlier.
This dragged down the benchmark Straits Times Index, which fell 2 per cent to close Friday at 3,191.82. This is the lowest since May 1 last year, which the index closed at 3,175.44.
Year-to-date, the index has fallen 6.2 per cent.
Aimed at cooling the property market and keeping price increases “in line with economic fundamentals", the Government announced a rise in the Additional Buyer's Stamp Duty (ABSD) rates and tightening of loan-to-value (LTV) limits on residential property purchases.
The new rates, which take effect today, come a day after the central bank noted “euphoria” in the property market.
Among the developers, City Developments Limited slumped as much as 17.8 per cent to S$9.22 - its lowest since February last year - before closing the day down 15.6 per cent at S$9.46.
UOL Group fell 13.5 per cent to end the day at S$6.70, its lowest close since March last year.
CapitaLand, Singapore’s largest developer, dropped 6 per cent to S$2.99, the lowest since December 2016.
Wing Tai slumped 6.9 per cent to end the day at S$1.89 - the lowest since May last year - after falling as much as 9.9 per cent intraday.
Among the small-caps, Oxley Holdings tumbled 15.9 per cent to S$0.345, while APAC Realty plunged 25.6 per cent to a record low of S$0.58.
Propnex, which soared 22 per cent on its trading debut on Monday, plummeted 24.6 per cent to S$0.52.
Since the tweaking of housing curbs last March, local property shares have seen their outlook brightened on the back of a pick-up in buyer sentiment and prices, which was later accompanied by a surge in collective sales.
Given the upbeat market conditions, market watchers have been positive on the sector, with developers among their top picks for most of the year.
But with the surprise move from the Government, analysts have begun downgrading their ratings for the sector.
OCBC Investment Research analyst Andy Wong, for one, has cut the local residential sector to a neutral stance, from overweight, and will be reviewing recommendations of developers under its coverage.
“While we previously argued that the positive outlook presented a buying opportunity in the midst of the sector correction, we no longer believe this to be the case,” he wrote in a note.
Describing the new measures as using a “sledgehammer to kill a fly”, Mr Wong added that these were not in the research house’s base case scenario given that private residential prices have only started to increase by less than 10 per cent since the trough in the second quarter of 2017.
Meanwhile, the smaller rate of quarter-on-quarter increase in the second quarter appeared to have dispelled concerns about a tighter regulatory environment.
Coupled with current macro uncertainties, near-term sentiment for local property shares will likely be soured, noted Mr Wong.
Echoing that, DBS analysts Derek Tan, Rachel Tan and Carmen Tay have turned underweight on local developer stocks and are pencilling in a potential 20 per cent downside in share prices.
They expect the combined impact of the new measures to raise the cost of home ownership and consequently, cool demand from investors and foreigners in the immediate term.
“In terms of sales momentum, we expect total volumes to fall to 9,000 to 10,000 units in 2018, and potentially even further if these curbs remain," they said.
The current en bloc cycle is also likely to come to an end as developers recalibrate their strategies to clear unsold stock at high prices, DBS analysts added.
RHB Research analyst Vijay Natarajan also described the fresh cooling measures as a "killer move" that will trigger a knee-jerk reaction in property stocks.
Expecting share prices to see a 5 to 10 per cent correction, he is looking to review his current overweight call on the sector and stock recommendations.
"We believe this will have bigger impact on high-end projects. Transaction volumes and prices overall are expected to see a slowdown as a result. We are of the view that developers holding large unsold Singapore residential landbank will see a bigger impact," he wrote in a morning note.
"For property agencies, the impact from a transaction volume slowdown is likely to be partially mitigated by possible increases in developer commissions. This is due to their need to sell units within the 5-year deadline."
BANKS HIT BUT LONG-TERM VIEW STILL POSITIVE
The tightening moves could also deal local lenders a blow though the longer-term view of the sector remains positive, according to RHB Research analyst Leng Seng Choon.
All three lenders fell on Friday.
DBS lost 2.6 per cent to close at a six-month low of S$25.35; United Overseas Bank dropped 3.1 per cent to S$26.26, and OCBC tumbled 2.3 per cent to a 9-month low S$11.24.
“The measures are expected to dampen demand for residential property, particularly investment properties. Among the three banks, UOB has the highest exposure to housing loans, at 27.6 per cent of its total loans – hence, UOB’s share price may be impacted more negatively in the short term,” wrote Mr Leng, who reiterated his neutral call on the sector.