CapitaLand Second-Quarter Profit Falls on Lower Gains

CapitaLand Ltd. (CAPL), Southeast Asia’s biggest developer, said prices and sales of Singapore residential properties are expected to moderate because of government measures aimed at curbing speculation.

The developer sold 139 residential units in the island-state in the three months ended June 30, 31 percent fewer than in the same period last year, the company said in a statement through the Singapore stock exchange today. Second-quarter profit fell 0.7 percent on lower portfolio gains, it said. The shares were 0.3 percent higher at S$3.22 at the close of trading in Singapore.

CapitaLand expects some headwinds for Singapore’s private residential property market in the near term, according to its earnings statement. The Monetary Authority of Singapore introduced a total debt servicing ratio cap of 60 percent for property loans granted by financial institutions. This is expected to have an impact on residential property sales, CapitaLand said.

“Most developers have been cautious post the latest round of measures,” Vikrant Pandey, a Singapore-based analyst at UOB Kay Hian Pte, said.

Singapore home prices climbed to a record in the second quarter as gains in suburban housing values accelerated, leading to new government measures on property loans at the end of June.

Housing Bubble

Record home prices amid low interest rates raised concerns of a housing bubble and prompted the government to widen a four-year campaign in January to curb speculation in Asia’s second-most expensive housing market. In January, the government increased stamp duties for homebuyers by 5 percentage points to 7 percentage points.

Singapore’s central bank estimates that between 5 percent and 10 percent of borrowers have probably over-leveraged on their property purchases with total debt service payment at more than 60 percent of their income, MAS Managing Director Ravi Menon said on July 23. Low interest rates, growing leverage, and surging property prices pose significant risks to financial stability, he said.

Net income at Singapore-based CapitaLand declined to S$383.1 million ($302 million) in the three months ended June 30, from S$385.9 million a year earlier. Earnings in the same quarter last year included divestment gains of S$81.8 million primarily from the sale of two shopping malls, CapitaLand said. Sales rose 37 percent to S$1.18 billion.

“We will continue to focus on our core markets of Singapore and China to develop homes, offices, shopping malls, serviced residences and mixed developments,” Lim Ming Yan, president and group chief executive officer at CapitaLand, said in the statement.

The developer in June said it acquired a 70 percent stake in Shanghai Guang Chuan Property Co. for 1.95 billion yuan ($318 million), through which it will develop a mixed-use project, which will include homes, offices and retail space.

Singapore and China accounted for 75.3 percent of the group’s profit before interest and tax as of June 30, the company said today.

To contact the reporter on this story: Pooja Thakur in Singapore at pthakur@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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