Could surprise easing of property cooling measures in Singapore spark turnaround?

SINGAPORE (March 13): A surprise letup of property cooling measures — albeit minor and targeted tweaks — on Friday sent property developer stocks soaring to the highest in more than 20 months.

But analysts believe that while the move is largely positive and buying sentiment can be expected to lift slightly, the impact on the property market is likely to gradual.

Singapore on Friday announced minor tweaks to the property cooling measures by way of a reduction of Seller’s Stamp Duties (SSD) and changes to the Total Debt Servicing Ratio (TDSR).

The government will reduce the holding periods for residential property purchased on or after March 11, 2017, down to three years. SSD rates have also been lowered by four percentage points.

It also announced the removal of the TDSR framework for mortgage equity withdrawal loans with Loan to Value (LTV) ratios of 50% and below.

“The TDSR tweaks are mainly targeted at retirees who are looking to monetise their assets amid challenging economic conditions,” says RHB Vijay Natarajan in a Monday report.

“While we do not expect a significant shift in buying sentiment due to the changes in policy, we anticipate sales volumes over the near term to pick up slightly,” says Natarajan.

RHB is keeping its “neutral” stance on the Singapore property sector. With the latest changes, however, the research house now expects property prices to fall by between 1-5% in 2017, compared to previous forecasts of a decline of 3-7%.

Maybank Kim Eng Research, too, is keeping its “neutral” call on the sector.

“We see the change in SSD as a positive for the property market,” says Maybank analyst Derrick Heng in a Friday report. “This has potential positive implications on sales volumes and prices.”

“However, we believe the market should curb their enthusiasm as home buying demand will remain constrained by the ABSD (Additional Buyer's Stamp Duties), LTV and TDSR requirements,” Heng adds.

On the other hand, DBS Group Research sees this as a sign of more easing of property cooling measures to come.

“Although the adjustments are marginal and the impact to the property market should be gradual, we see this as a signal of a turn in policy stance which could lead to further relaxation in the future,” says DBS lead analyst Rachel Tan in a Monday report.

RHB’s Natarajan points out that the changes are likely to have been a pre-emptive strike to counter any sharp deterioration of the property market ahead on an anticipated increase in interest rates.

To this end, Tan adds that “a potential risk in the horizon is more than expected aggressive Fed rate hike momentum which may marginally dampen the euphoric sentiment.”

“However, when that happens, we believe that the government stand ready loosen further measures which will continue to support prices and spur transaction volumes,” she says. “This move confirms expectations that the government is ready to act pre-emptively to stabilise the property market.” — theedgemarkets.com.sg

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