Property stocks badly hit by new curbs

SINGAPORE - It was another sea of red in the local market on Wednesday, but property counters emerged among the worst off from the downdraft after the Government unveiled yet another round of property loan curbs.

Analysts say the new rules will lower overall demand for property and therefore mortgage loans.

Property heavyweights felt the hammer blow from the rule revision, with several counters dropping 2 per cent or more on Wednesday.

CapitaLand fell seven cents or 2.3 per cent to $2.93; City Developments lost 22 cents or 2.2 per cent to $9.76 and Wheelock sank 3.5 cents or 2 per cent to $1.71. Keppel Land declined four cents or 1.2 per cent to $3.32.

In comparison, the fall in the broader market was tamer, with the benchmark Straits Times Index (STI) shedding 0.98 per cent or 29.84 points to end the day at 3,004.18.

Mid-sized and smaller property developers fared better, with Wing Tai adding six cents to $2.10 and Bukit Sembawang trading flat at $6.

Under the new rules unveiled on Tuesday, permanent residents will now have to wait three years after receiving their PR status to buy a resale HDB flat.

Borrowers who take out HDB loans from banks now have a maximum repayment period of 30 years, down from the current 35 years.

And they can take only up to a maximum loan of 30 per cent of their gross monthly pay, down from 35 per cent previously.

Despite the tightened loan measures, banking stocks were relatively resilient and declined at a milder pace compared with property counters.

DBS fell 15 cents or 0.9 per cent to $15.85, OCBC Bank slipped three cents or 0.3 per cent to $9.89 while United Overseas Bank was flat, shedding a cent to $20.05.

The new measures would shift some demand from the HDB resale market to the more affordable Build-to-Order market, said analysts from Religare Institutional Research in a report on Wednesday.

This would likely lead to a correction in HDB resale prices, they said. "The current measures could in fact (also) result in lower demand for private units, as the purchasing power of upgraders could be curtailed, while PRs might not be able to take the leap to the private market," they wrote.

"We would continue to avoid Singapore(-focused) developers, like City Developments and prefer diversified developers instead like Keppel Land and CapitaLand."

CMC Markets analyst Desmond Chua also noted that the STI has been rather resilient in the past few weeks compared with its regional peers.

Although the slide in the market has made valuations cheaper and more attractive, Mr Chua advises investors not to rush in just yet.

"The current tensions over the Middle East might result in higher oil prices, which would lead to higher inflation and thus a sell-off in global equity markets," he said.

yasminey@sph.com.sg

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