Property

Property: Singapore rolled out the most “comprehensive” housing measures since it started cooling the market in 2009 and may drive prices lower for the first time in five years, according to Mizuho and Barclays. The 7th round of cooling measures include, (1) higher additional buyer’s stamp duty (ABSD); (2) lower LTVs for second and third housing loan, higher minimum cash down payment; (3) lower mortgage service ratio for HDB projects, and limitations for use of CPF funds for public property; (4) restrictions for PRs subletting rents and owning HDB + Private; (5) restrictions on executive condos; and (6) seller’s stamp duty for industrial assets. Credit Suisse expects “knee-jerk” drop of ~15% in Singapore property developer shares. Says volumes could drop 30% in 2013. Estimates, ~ 30% of purchases are for investment purposes. Assuming that primary volumes do revert to 2011 levels, this implies about a 30% decline from 2012. Notes near-term prices may still hold up due to strong balance sheets, but developers may turn desperate if inventory stagnates. Prefers developers with more overseas exposure like CMA and CapitaLand as they provide a proxy to China consumption-led demand and earnings are supported by recurring income streams from other businesses like retail rental income. Also likes City Dev for its execution, but notes the stock may take a near-term hit given its huge exposure to SG residential—prefers buying on dips. Barclays sees sales down 30%-35% from 2012’s record 23,000 level to “more sustainable” 15,000-16,000 units. Negative on developers on margin concerns and slower volumes. Believes liquidity may be channeled into strata office, retail assets, REITs. Reiterates overweight CCT, CapitaLand ( “even more compelling” on dips). Deutsche sees residential developers as most vulnerable. Notes biggest declines on day after Dec. 7, 2011 measures included City Dev (-8.4%), Ho Bee (8.1%), Keppel Land (-8%), CapitaLand (-7.3%), Wing Tai (-6.5%), SC Global (-6%), SPH (-5.6%). Morgan Stanley notes in previous property measures, property stocks fell 5-7% in the first few days then stabilized. Believes amongst the bigger developers, City Dev has the highest SG residential exposure at 30% gross asset value (GAV), followed by Keppel Land (15%) and CapitaLand (9%). Prefers Reits where residential exposure is zero, and CMA where exposure is to retail.