Published January 15, 2013

[B][SIZE="5"]Home sales will fall, even prices may slide[/SIZE][/B]

[B]Property counters retreat as sector comes to terms with latest set of cooling measures[/B]

By Mindy Tan

[SINGAPORE] In what could be the first rumblings of a long-raging storm, property counters fell while analysts predicted that private home sales would drop and even prices may dip.

Some expect property stocks to fall by up to 15 per cent in the wake of the most comprehensive round of cooling measures to hit the sector.

The more dire estimates expect property prices, which have climbed despite previous cooling measures, to fall by up to 10 per cent and for transaction volumes to crash by up to 50 per cent.

Analysts have also warned that more measures could be in the works.

Standard Chartered said private home take-up could potentially fall to about 10,000 units in 2013, a more than 50 per cent decline from the 21,600 units in 2012. This is assuming Singaporeans do not buy a second property due to the additional buyers stamp duty (ABSD) of 7 per cent which is now imposed on the purchase of a second property.

"A secondary effect is that current home owners with more than one home may refuse to sell their units because a repurchase would incur the ABSD. We expect resale transactions to fall by 30-50 per cent from the current 10,000 per year," added the bank.

UOB Kay Hian said it expects investment demand and the mass-market segment to be most impacted, with sales volumes expected to drop 20-40 per cent, and prices to dip 5 per cent.

Credit Suisse said it expects volumes to drop 30 per cent, given that about 30 per cent of purchases are for investment purposes, based on the results of a survey conducted.

"Near-term prices may still hold up due to strong balance sheets, but developers may turn desperate if inventory stagnates," said Credit Suisse. "Overall, we expect prices to remain relatively flattish, although we expect a further 5-10 per cent downside risk for prime due to the vacancy, given the oncoming supply and unsold units versus weak rental demand."

Barclays Research observed that the additional 5 per cent ABSD imposed on foreigners (foreigners and corporate entities now have to pay 15 per cent ABSD from their first purchase) would be a further blow to the high-end to luxury properties that typically have 30 per cent foreigner buyers and have already been lagging the suburban properties on excess unsold completed inventory.

While Maybank Kim Eng analyst Wilson Liew lauded the imposition of ABSD on Singaporeans purchasing their second, third, and subsequent homes, he questioned the necessity of raising the ABSD for foreigners.

"The percentage of foreign non-PR homebuyers had remained fairly stable at 7 per cent in each quarter last year. They also accounted for less than 10 per cent of the transactions for properties priced below $1,670 psf. Hence, the higher ABSD imposed on foreign buying could have been unnecessary," he said.

Mr Liew said he expects the mass market segment to be the worst hit as marginal investors are forced to the sidelines. The high-end segment which had enjoyed a "mini-revival" in the last quarter is likely to go into intermission as well, but longer-term fundamentals will prevail.

The immediate impact of the measures was evident in the stock market, where property counters took a beating. Some of the biggest losers included Wing Tai Holdings which lost 18 cents (8.9 per cent) to close at $1.84, City Developments which lost 95 cents (7.54 per cent) to close at $11.65, and Keppel Land which lost 31 cents (7.2 per cent) to close at $3.97.

SC Global Developments, the subject of a privatisation bid by chairman and chief executive Simon Cheong, bucked the trend, climbing half a cent to close at $1.805.

Yesterday, Mr Cheong bought an additional 3.042 million shares at $1.795-$1.80 each. With the public float standing at 14.52 per cent, any additional acquisition by Mr Cheong and/or other non-public shareholders that in aggregate exceeds 4.5 per cent will bring the public float below the minimum 10 per cent that is required for the company to stay listed. Mr Cheong's privatisation offer closes tomorrow.

Even as stocks bear the brunt of the knee-jerk reaction, OCBC analyst Eli Lee, who expects dips of 3-10 per cent, cautioned against buying on dips.

"We see the latest set of cooling measures having a deeper and more sustained impact on demand fundamentals," he said. "(They) point to a strong political will to soften property prices, and we expect sustained and aggressive curbs until prices reach levels deemed acceptable."

DMG & Partners analyst Goh Han Peng advocates holding back on bargain buying given that the full impact will only sink in slowly, as market activities dwindle and prices soften.

Bank stocks too slipped - UOB lost 44 cents (2.29 per cent) to close at $18.78; DBS lost 29 cents (1.97 per cent) to close at $14.41; OCBC lost 13 cents (1.33 per cent) to close at $9.62.

UOB Kay Hian noted that loan growth has already slowed after the previous six sets of cooling measures, with housing loans moderating from a high of 23.4 per cent in Aug 10 to 16.1 per cent in November.

DBS said it expects housing loan growth to be supported by drawdown of mortgage applications over the next 1-2 quarters, but to gradually drop.

"We forecast mortgage loans will grow by 8 per cent in 2013, noting that there is still a market for natural new home buyers and HDB upgraders."

What's more, the cooling drive could continue. Leif Lybecker Eskesen, chief economist for India & Asean at HSBC, said: "It's too early to tell, with interest rates expected to remain very low for the foreseeable future and the economy projected to gradually recover during the course of 2013. Moreover, with global economic and financial conditions also likely to look better when we get deeper into 2013, foreign inflows into the property market could pick up."

"In our view, further cooling measures over the next few years cannot be ruled out," he said.

Maybank Kim Eng's Mr Liew said that while the government's latest salvo aims to soften the property market, it is unlikely to be its last in this low interest rate environment.