SINGAPORE (March 14): The Singapore Government surprised the market with a modest easing of the existing property market measures.
This involved calibrated adjustments to the Seller's Stamp Duty (SSD) and Total Debt Servicing Ratio (TDSR) framework.
The core elements of the property market measures aimed at financial prudence like Additional Buyer Stamp Duties (ABSD) and Loan to Value (LTV) limits, however, remained unchanged.
“In the existing arsenal of measures that can be loosened, these SSD and TDSR tweaks are baby steps and have more bark than bite, in our view,” says UBS analyst Michael Lim in a Monday report.
“For stocks, we think the signalling of policy relaxation, albeit modest, is a major positive and a sentiment booster,” says Lim.
That should support a narrowing of the RNAV discounts that developers currently trade at.
As such, UBS is reiterating its “buy” rating on City Developments and raising its price target to $11.50 from $9.90.
UBS also has a “buy” on UOL with a higher target price of $8.15.
Since 2009, Lim says speculative buying has already been on a downtrend with sub-sales at just 1% of total sales.
As such, a shorter holding period where SSD is payable from four years to three years is unlikely to drive a major rebound in transactions.
That said, buyers on the sidelines could re-enter the market as housing policies would be less restrictive going forward.
The TDSR revision is aimed at providing greater flexibility to retirees and those seeking cash against the value of the properties.
Incremental buying from this pool is small since 40% of housing loans are below 70% LTV and an even lower proportion below 50%.
Moreover, new purchases would still have to meet the original 60% TDSR threshold.
Shares of City Developments and UOL are trading lower at $10.28 and $6.92.
