BT: Stocks fall, sales stall as new normal kicks in

Business Times - 09 Dec 2011

Stocks fall, sales stall as new normal kicks in

Analysts project big drop in private home prices and sales with new measures in place

By CHEN HUIFEN

(SINGAPORE) Bank and property stocks tumbled yesterday as investors reacted with shock to the latest round of measures to curb foreign and speculative buying in Singapore's private property market, potentially setting the stage for a period of uncertainty with implications for the economy.

Counters of City Developments Ltd, DBS, UOB, UOL, CapitaLand and OCBC shed between 2 and 9 per cent, as increasingly shrill and sombre analyst reports flagged the pitfalls facing these companies.

Developers, especially those in the luxury markets, are seen to be the most vulnerable, given that their projects tend to attract a sizeable pool of foreigners who, together with corporate entities, will have to fork out 10 per cent more in buyer's stamp duty from now on.

This is higher than the 1-3 per cent that they paid previously, depending on the purchase price or market value of the transacted property.

As well, permanent residents will have to pay 3 per cent more in additional stamp duty on their second and subsequent homes, while Singaporeans will be taxed similarly on their third and beyond.

These measures are expected to dampen the residential property market by lowering overall demand in the purchase of private residential properties for investment.

Coupled with the release of new government land sites in the first half of next year that will give rise to about 14,100 private homes, the measures are aimed at giving Singaporean households the chance to own or upgrade to private housing.

While the intent is laudable, industry players and observers are questioning the timing of the announcement.

One economist has suggested that the latest moves could potentially tip Singapore into a recession, given that there could be spillover effects on peripheral sectors such as legal, banking and construction. Consumer spending may be hurt as well if falling property values lead to shrinking wealth.

'Given that the economy is already fairly weak and we are sort of bouncing on the edge, it may have tipped the balance into recession given that our readings are already pointing to a possible recession,' said Bank of America Merrill Lynch economist Chua Hak Bin.

Already, sales agents have indicated that clients who had previously shown interest in projects here are now holding back on decisions. Developers are said to be deferring upcoming launches as they take stock of the situation. It remains to be seen if any buyers who have signed options to purchase may back out of their deals in the coming weeks.

Analysts are projecting a fall of up to 30 per cent, in terms of both home prices and monthly sales volume, next year. But of significance is the message that the calibrated taxes may send to foreign talent and investors.

'In cosmopolitan Singapore, property and housing not only showcase the country but are the best key expression of our city,' said Norman Ho, a partner at Rodyk & Davidson LLP. 'To our foreign friends and investors one of the few things Singapore can offer is a good environment for living and place to call their own while they invest their talents and time here.

'This past year, the financial crises in Europe, struggling recovery in the United States, civil uprisings in the Arab Spring as well as slowing economies amidst our region are cause for consolidation and reflection.

'The measures should only be announced with careful and prior consultation with the stakeholders in the real estate industries and with the view of the possible macro 'knock-out' effect which may have on the already fragile economy.'