Singapore may act to cool rising home prices, analysts say

SINGAPORE (BLOOMBERG) – Singapore may be considering another round of measures to cool residential prices, according to market analysts, who see recent ministerial remarks as a signal for the possible move.

Comments made by  Singapore’s Deputy Prime Minister and Finance Minister Heng Swee Keat indicate the government is keeping a close watch on property prices, Jefferies Financial Group analyst Krishna Guha wrote in a note. Possible steps could include a tweak in additional buyer stamp duties, tightening of mortgage terms and an adjustment in average minimum home sizes for new developments, according to DBS Group Holdings.

The authorities will remain “vigilant” owing to an uncertain economic outlook and “do not want to see the property market run ahead of the underlying economic fundamentals”, Mr Heng said at an event with real estate developers on Monday (Jan 18).

Private home prices in Singapore rose to their highest in more than two years in the quarter ending December, bringing the full-year increase to 2.2 per cent for 2020, according to official flash estimates earlier in January.

HDB resale prices, meanwhile, rose 4.8 per cent last year, higher than the 0.1 per cent growth in 2019 and the 0.9 per cent decline in 2018, flash estimates showed.

Property Stocks

City Developments, UOL Group and APAC Realty are stocks that will be potentially affected by any government measures, according to DBS analyst Yeo Kee Yan. There will be a lower impact on CapitaLand given its low Singapore exposure, he wrote in a note titled “Look out for policy tweaks”.

While launches and volumes may slow if there is another round of cooling measures, factors including low interest rates, ample deposits and healthy capital market gains will prop up the market, Jefferies’ Mr Guha wrote. Pandemic-related relief measures, expectations of a revival of the en bloc market, as well as the sustained wage growth of residents over the past decade, will also cushion the impact.

He maintains buy ratings on City Developments and Wing Tai Holdings on “attractive valuation, diversified revenue sources”.

“Despite Covid-19, asset prices in the world have been going up. In our local property market, we are also starting to see renewed positive sentiments and some gathering of momentum in prices,” Mr Heng said in his speech. “We must continue to enable young Singaporeans to own their homes and fulfil their aspirations. This is why we pay close attention to the property market to ensure that it remains stable.”

With additional information from The Straits Times