Property Stocks Decline on Latest Housing Curbs

Singapore’s property stocks fell, driving an index tracking developers to a one-year low, after the government tightened its public housing policy by reducing tenures for new loans and restricting purchases by foreigners.

The Singapore property index tracking 43 stocks fell 1.4 percent to 692.64 at the close in Singapore trading, the lowest since Sept. 11. Singapore will cut the maximum tenure for new loans to purchase homes built by the state to 25 years from 30 years, the Housing & Development Board said in a statement on its website. Mortgage payments are capped at 30 percent of their gross monthly income, down from 35 percent.

With 82 percent of Singaporeans living in government-built apartments, housing rules have been used to encourage the development of families and other government policies. Public housing regulations also affect private developers because the companies rely on these homeowners to upgrade to condominiums.

“These measures continue to be negative for the Singapore private residential market, given that upgrader demand has contributed to a significant portion of mass-market private residential housing demand,” Citigroup Inc. analysts Adrian Chua and Ivan K. Lim said in a report yesterday. “A weaker HDB resale will impinge on upgrader households’ ability to monetize their flats.”

CapitaLand Ltd., the city’s biggest developer, lost 2.3 percent to S$2.93, the lowest since July 24, 2012. City Developments Ltd., the second largest, dropped 2.2 percent to S$9.76.

Foreigner Restrictions

Foreigners will be allowed to buy existing HDB flats three years after they obtain permanent residential status in the island city, the board said. Previously, they could buy the apartments after becoming permanent residents. The measure took effect 5:30 p.m. local time yesterday.

“We are introducing two measures to further stabilize the HDB resale market,” the board said in the statement. “These measures are in line with those introduced by the Monetary Authority of Singapore to encourage financial prudence among borrowers, which is especially important given the current low interest rate environment is unlikely to be sustained.”

The city’s private home sales in July slid to the lowest since December 2009 as investors balked at new curbs on property loans and developers marketed fewer projects. Home sales fell to 481 units last month, 73 percent lower from a month earlier, according to data from the Urban Redevelopment Authority on Aug. 15.

The NUS Singapore Residential Property Index rose 0.2 percent in July from the previous month after declining 0.1 percent in June, data showed today.

‘Weak Market’

“In an already weak market, we expect the incremental measure to be taken negatively by the market,” Credit Suisse Group AG analysts Yvonne Voon and Sing Ping Chok said in a research report today. “We still expect near-term property prices to be flattish supported by low vacancy and healthy balance sheet.”

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. Singapore in June also unveiled new rules governing how financial institutions grant property loans to individuals, extending the efforts.

Singapore has been attempting to rein in prices since 2009, when the government barred interest-only loans for some housing projects and stopped allowing developers to absorb interest payments for apartments still being built.