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CapitaLand, Banks Decline on Mortgage Loan Cap: Singapore Mover

CapitaLand Leads Developers Lower on Loan Cap
Pedestrians walk outside the Ion Orchard mall, jointly owned by CapitaLand Ltd. and Sun Hung Kai Properties Ltd., on Orchard Road in Singapore. Photographer: Munshi Ahmed/Bloomberg

Singapore developers and banks fell after the government restricted home-loan maturities in a bid to curb a housing bubble as property prices in the island-state rose to a record.

CapitaLand Ltd., Southeast Asia’s biggest developer, dropped 3.3 percent to S$3.19 at the close of trading, its biggest decline in almost five months. Keppel Land Ltd., the developer partly owned by the world’s largest oil-rig builder, slid 1.7 percent to S$3.50, the biggest drop since July 23. City Developments Ltd., Singapore’s second-largest developer, fell 2.3 percent to S$11.67, the biggest slide in two months.

The maximum tenure for new residential property loans will be capped at 35 years, the Monetary Authority of Singapore said in an e-mailed statement on Oct. 5. It will also impose tighter loan-to-value limits for loans exceeding 30 years, it said. The rules, which became effective Oct. 6, will apply to both private properties and Housing Development Board flats.

“It’s a knee-jerk reaction to the measures announced,” Wilson Liew, Singapore-based analyst at Maybank Kim Eng Holdings Ltd., said in a phone interview. “The measures are more preemptive and may weed out marginal buyers in the mass market segment. I don’t see a significant impact on demand.”

The government has been trying to rein in residential property prices since 2009. It has barred interest-only loans for some housing projects, stopped allowing developers to absorb interest payments, imposed additional taxes on foreigners and companies buying properties, and moved to curb the increasing trend of so-called shoebox apartments.

Longer Tenures

Among lenders, DBS Group Holdings Ltd., Southeast Asia’s biggest bank, declined 1.5 percent to S$14.25, while Oversea-Chinese Banking Corp., the second largest, lost 0.4 percent to S$9.45. United Overseas Bank Ltd., the third largest, fell 1.3 percent to S$19.58.

With the central bank’s new guidelines, OCBC will reduce its existing maximum home loan tenure of 40 years to 35 years with immediate effect, Koh Ching Ching, a Singapore-based spokeswoman for the bank, said in an e-mail Oct. 5.

Over the past three years, the average tenure for new residential property loans has increased from 25 years to 29 years, the MAS, the island-state’s central bank, said. More than 45 percent of new home loans had durations that exceeded 30 years, it said.

“Presently, the majority of our home loans are below 35 years,” Lui Su Kian, head of deposits and secured lending at DBS, said in an e-mail Oct. 5. “It will take some time to ascertain the impact of the new measures while homebuyers assess the market.”

Singapore home prices climbed to a record in the third quarter after developers sold more homes. The island-state’s private residential property price index rose 0.5 percent to 208 points in the three months ended Sept. 30, according to preliminary estimates released by the Urban Redevelopment Authority on Oct. 1. The index advanced 0.4 percent in the previous quarter, which was also at a record.

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