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Property measures: Home prices may fall 30%, say analysts
Property stocks hammered, following stamp duty shocker

Published on Dec 9, 2011



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Property prices could fall by as much as 30 per cent next year as a result of the Government's latest move to cool the market, analysts have predicted. -- ST PHOTO: ALPHONSUS CHERN
By Yasmine Yahya & Esther Teo

Property prices could fall by as much as 30 per cent next year as a result of the Government's latest move to cool the market, analysts have predicted.

This would be a chilling replay of what happened during the global financial crisis in 2008 and 2009, when home prices slid 25 per cent over 12 months.

These sobering warnings arrived on Thursday amid a slew of analyst reports taking stock of the surprise measures to cool Singapore's property market announced on Wednesday night.
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PRIVATE HOME PRICES

The curbs include an unprecedented extra stamp duty of 10 per cent on any foreigner buying a residential property here.

CIMB Research analysts called the Government's move a 'bazooka' that could shoot down property prices overall by 15 to 20 per cent over the next 12 months.

Goldman Sachs analysts see a 'state of paralysis' for the property market. Their prediction is for private home prices to slide 15 per cent over the next 18 months.

Standard Chartered Bank was the most bearish. A report by the bank last week had already envisioned prices dropping up to 30 per cent over three years. Now the bank expects the same fall to occur within one year.

Stock market investors reacted from the opening bell, sending property stocks into free fall. The worst hit were City Developments and Keppel Land, which lost more than 8 per cent, wiping hundreds of millions of dollars off the traded values of their companies by the end of the trading day. Inside their offices, these and other property developers went back to the drawing board. Some said they were caught off-guard by the measures, and were reviewing their next plan of action.

A City Developments spokesman said: 'The measures will have a dampening effect in the short term so we will have to re-assess the market situation and, if necessary, tweak our strategy.'

Some did not mince their words. A developer who declined to be named said that too many policies and the frequency of their shifts do not reflect well on Singapore as an investment destination.

'If the Government wants to target foreign buyers, then it should also look at the entire spectrum and specifically the increasing presence of foreign developers here who are driving up land prices.'

UBS analysts believe the next move from developers may be to offer a partial absorption or rebates of the additional buyer's stamp duty.

'Launches are likely to see delays as developers would have to spend more time building up a critical mass of buyer interest before having the confidence to launch a project,' they said in a report.

One of the first developers to be jolted into action was UOL Group. According to an internally circulated text message obtained by The Straits Times, it is offering agents a cash incentive of between $5,000 and $15,000 for each unit sold at its Archipelago project in Bedok from now till Sunday.

Those who had secured sales earlier made sure they did not lose them as buyers wavered. On Thursday, property agents were rushing around to make sure that options for deals were signed.

Analysts said anticipated transaction volume and price declines will not be uniform across the whole property market.

The high-end segment will be hit much harder than the mass market sector, as luxury homes tend to attract the highest proportion of foreign buyers.

Sales of private homes in the core central region, which includes prime areas such as Orchard Road and Newton, could plunge 40 per cent as a result of the new measures, said the chief executive of property agency PropNex, Mr Mohamed Ismail.

Foreigners and PRs accounted for 44 per cent of home sales in prime districts, such as Sentosa Cove and Districts 9, 10 and 11.

But the mass market property segment will not go unscathed.Though foreign buying activity in this segment is lower, the expectation of lower prices will cause Singapore buyers to also hold back.

'I would expect transaction volume to fall within the next 30 days as buyers hold back,' said Dr Chua Yang Liang, head of research at Jones Lang LaSalle South-east Asia.'If prices ease, buyers might return but this is also conditional on whether the economy improves.'

Mr Ismail expects mass market home prices to slide 10 to 15 per cent in the next six months.

National Development Minister Khaw Boon Wan touched on the measures in an entry on his blog on Thursday, saying they 'will further strengthen, stabilise and sustain our property market'.

But investors who recently bought new properties will likely take some time to absorb the news. 'I am still shocked by what happened. Originally I wanted to hold on to the investment for four to five years, now it looks like I need to have longer staying power,' said a 32-year-old civil servant who wanted to be known only as Mr Lim.

He bought a two-bedroom, $1 million Bedok Residences unit about two weeks ago. 'In a way, I feel lucky that I chose a unit in a good location, which I think will be more resilient to price erosion.'