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SINGAPORE: Singapore’s developers posted the worst performance on the benchmark Straits Times Index this year after recording the biggest gains in 2012 as property curbs drove home sales lower and slowed price gains.
Property stocks in Singapore, ranked the most-expensive city to buy a luxury home in Asia after Hong Kong, may further languish next year following measures by the government to cool prices. Home sales may decline 10% in 2014 while prices are expected to drop for the first time in two years, according to broker Chesterton Singapore Pte.
The property curbs, which included stamp duties and other taxes on home purchases, led Citigroup Inc and UBS AG to rate the city’s residential developers underweight in the past two months. CapitaLand Ltd and City Developments Ltd, the nation’s two biggest listed developers, were among the three worst performers on the index after being in the top 10 last year.
The city-state began introducing residential curbs four years ago. The government of Prime Minister Lee Hsien Loong intensified efforts this year as prices jumped to a record high, driven by low interest rates, demand from Singaporeans to upgrade from public housing, as well as purchases by overseas buyers.
The measures included a cap on debt at 60% of a borrower’s income.
Prices and transaction volumes of Singapore residential properties are expected to decline for the rest of the year due to the cumulative impact of government measures, CapitaLand, Southeast Asia’s biggest developer, said on Oct 31. Developers are beginning to cut prices in existing and new projects and take lower profit margins, City Developments, Singapore’s second-largest developer, said on Nov 12.
Sales of new private homes could drop to 15,000 units this year from 22,197 in 2012, according to Desmond Sim, associate director at CBRE Research.
Higher borrowing costs, falling public housing resale prices, slower population growth and a record number of apartment completions suggest that residential demand will wane, Wilson Liew, an analyst at Maybank Kim Eng Securities, wrote in a Dec 17 note.
“Physical prices look set to correct and we expect continued share price weakness unless the government removes some of the cooling measures,” Liew said.
Developers may get a reprieve as the government cut the number of sites it plans to sell in the first half of 2014, according to SLP International Property Consultants, citing its analysis of the data from the Urban Redevelopment Authority.
The decrease “could bring some relief to developers who have unlaunched residential projects or projects with substantial number of unsold units”, said Nicholas Mak, executive director of research & consultancy at SLP in Singapore. — Bloomberg
This article first appeared in The Edge Financial Daily, on December 31, 2013.
