CapitaLand to Alter Home Sizes to Tackle Curbs: Southeast Asia

CapitaLand Ltd., Singapore’s biggest developer, may alter the size of its apartments as it seeks to improve affordability to combat government measures aimed at curbing speculation and lowering prices.

The developer sold 139 residential units in the island-state in the three months ended June, 31 percent fewer than in the same period last year, it said yesterday as it forecast “headwinds” in the near term with the housing curbs.

After adding taxes on home sales and mortgage limits, the city’s central bank last month capped property loan repayments at 60 percent of salaries, which the developer cited as an additional measure on home sales. Prices and sales of Singapore residential properties are expected to moderate because of the housing curbs, the company said.

“We are now looking at how we can respond to the current market situation,” Lim Ming Yan, president and chief executive officer at CapitaLand, said in a Bloomberg Television interview in Singapore yesterday. “We want the right sizing, put in the right layout, so our users will find it a lot more user-friendly and at the same time something they can afford. This is the direction we’re moving towards.”

Lim, who took the helm at the start of the year, didn’t elaborate on details for the change in apartment sizes.

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 in June. Today’s revised data showed residential values increased 1 percent in the three months from an earlier 0.8 percent estimate.

Housing Bubble

The price increases 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.

CapitaLand will start selling two projects in the second half of the year including Marine Point and its second condominium project in the central suburb of Bishan comprising 694 units, the developer said.

The plans for the new project in Bishan show that it will construct apartments with an average size of between 800 square feet and 900 square feet, based on the number of units planned, according to Tricia Song, an analyst at Barclays Plc in Singapore. For previous developments, the average size was between 1,200 square and 1,600 square feet, she said.

“The fact that they are similar plots and that they are planning about 40 percent more units means they are thinking of downsizing units,” she said. “It will make it more affordable and this is the trend of Singapore residential sales as we see it.”

Shoebox Apartments

Singapore decided to regulate the sale of smaller-sized residential units after developers sold a record number of so-called shoebox apartments last year. Shoebox apartments are those smaller than 50 square meters (538 square feet).

Singapore is the most-expensive residential market after Hong Kong, according to a Knight Frank LLP and Citi Private Bank report released last year that compared 63 locations globally.

The 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, Monetary Authority of Singapore 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.

Shares of CapitaLand, also the biggest developer in Southeast Asia, climbed 1.2 percent to S$3.26 at the close in Singapore, the highest in more than a month. The stock has fallen 10 percent in the past three months, compared with the 8.4 percent decline in the measure tracking Singapore property stocks and 8.6 percent drop in the Bloomberg Asia Pacific Real Estate Index.

“These are policies that will have an impact on transactions,” Lim said, adding that “on the whole, the market has more or less digested the measures.”

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