SINGAPORE: Property stocks in Singapore came under heavy selling in early trade on Friday (Jul 6), as investors reacted to surprise news of fresh cooling measures announced a day earlier.
In an effort to "cool the property market and keep price increases in line with economic fundamentals", the Government said on Thursday evening that it would raise the Additional Buyer Stamp Duty (ABSD) rates and tighten loan-to-value (LTV) limits on residential property purchases.
Advertisement The new rates take effect on Friday.
Developers were among the biggest decliners on the benchmark Straits Times Index (STI) in early trading.
UOL Group fell 11.6 per cent to S$6.85, while City Developments slumped 13 per cent to S$9.750.
CapitaLand, Singapore’s largest developer, opened down 3.1 per cent to S$3.08.
Advertisement Advertisement Property broker Apac Realty declined nearly 2 per cent to S$0.78. Propnex, which soared 22 per cent on its trading debut on Monday, fell 8.6 per cent to S$0.63.
Since the easing of some housing curbs last March, local property stocks have seen their outlook brightened alongside the recovery in investor sentiment and prices, which was later accompanied by a surge in collective sales.
Given the upbeat market conditions, analysts have been positive on the sector, with developers among their top picks.
However with the surprise news, at least one analyst is looking to review his sector call and stock recommendations.
In a note on Friday, RHB Research Institute's property and REITs analyst Vijay Natarajan described the unexpected news as a "killer move" that will trigger a knee-jerk reaction in property stocks.
He currently has an overweight call on the sector and expects share prices to see a 5 to 10 per cent correction.
"We believe this will have bigger impact on high-end projects. Transaction volumes and prices overall are expected to see a slowdown as a result. We are of the view that developers holding large unsold Singapore residential landbank will see a bigger impact," he said.
"For property agencies, the impact from a transaction volume slowdown is likely to be partially mitigated by possible increases in developer commissions. This is due to their need to sell units within the 5-year deadline."
The broader STI opened down 0.73 per cent, or 23.75 points, at 3,232.96 on Friday, with losers outnumbering gainers by 75 to 39. At the open, some 31.7 million shares worth S$77.9 million had changed hands.
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