OVERWEIGHT (Maintained)

* Two measures to “ensure a sustainable and stable” property market: Further to the three measures announced by Singapore’s Ministry of National Development (MND) on Sept 14, 2009, another two measures were announced on Feb 19, 2010 to further deter speculative activities. Measures are:

i) Introducing a Seller’s Stamp Duty (SSD) on all residential properties and lands that are bought from Feb 10, 2010 and sold within one year of purchase and;

ii) Lowering the Loan-to-Value (LTV) limit to 80% for all housing loans provided by financial institutions regulated by the Monetary Authority of Singapore (MAS).

* Objective of SSD to deter short-term speculative activities: Objective of this new measure is to discourage short-term speculative activity that could artificially inflate property prices. However, MND stressed that it was not targeting homes bought for owner occupation or longer-term investment. SSD will be applied at the standard ad valorem stamp duty rates which is 1% for the first S$180,000 (RM434,794) of the consideration, 2% for the next S$180,000 and 3% for the balance. As an illustration, a sale of a S$1mil property would attract S$24,600 in SSD. Currently, buyers are also paying the same rate of stamp duty when purchasing property. On a side note, SSD will not be applicable to purchasers of HDB flats as they typically have to fulfil a minimum occupation period of one year.

* Lowering LTV limit to 80% for housing loans: LTV limit will be lowered from 90% to 80% for all housing loans provided by financial institutions regulated by MAS. It will apply to all types of residential properties such as private, executive condominiums, HUDC flats and HDB flats. However, for loans granted by HDB for HDB flats, they will still have a LTV cap of 90%. MND explains that HDB flats are already subjected to other criteria to deter speculation and enhance financial prudence such as minimum occupation period and restriction of one HDB flat per household.

* Less than 10% of housing loans at LTV above 80%: Presently, only households whom have exhausted their two chances of purchasing “subsidised” HDB flats (either brand new HDB flats or resale flats with a grant of S$30,000) or have exceeded the maximum household income ceiling of S$8,000 per month will need to turn to the banks for financing of their HDB flats. Currently, less than 10% of housing loans are granted at LTVs greater than 80% though there are signs that an increasing number of housing loan applications are granted at higher LTV threshold.

* Strong take off: Developers sold 1,476 new homes in January 2010. M-o-m, sales more than doubled after breaking away from five consecutive month of decline. It also surpassed September 2009 sales of 1,143 units (coincidentally the first time Government announced the three anti-speculative measures) but below August sales of 1,805 units. Sales were led by Core Central Region (“CCR” -47%), Outside Central Region (29%) and Rest of Central Region (24%).

Matching the ratio of units sold against launched, it surpassed 100% (the last time it hit a high of 143% was in October 2009). Y-o-y, the ratio in January 2010 (104%) almost doubled that of 53% in January 2009.

* Small units making quantum affordable: Buying sentiment remains buoyant as developers built smaller units in CCR to cater to quantum-conscious buyers. All three notable projects in January 2009 have substantial number of studio and 2-bedroom units to enhance affordability of units to buyers in spite of high ASP. The Government is “concerned” that marginal buyers are now stretching themselves chasing after private properties for a quick investment return.

* Sub-sales data may warrant some concern: In a Straits Times report recently, a latest study by property consultancy DTZ revealed that sub-sales of non-landed homes had fallen to a three year low of 14% against 15% in 2007 and 16% in 2008. However, it is still significantly higher than 2% - 11% recorded between 1998 - 2006. Before the Government came out with capital gains tax in 1996, sub-sales hit a high of 29% of total sales in 1995 and 23% in 1996. Other than pace of price increases, we believed rate of “flipping” could be the other key element, which the Government is trying to address with its slew of anti-speculative measures.