Singapore’s Home-Price Decline Accelerates After Curbs

November 28, 2013 Leave a comment

Singapore’s Home-Price Decline Accelerates After Curbs

Singapore’s home prices fell at a faster pace in October, dropping 1.2 percent from the previous month as evidence builds that the government’s efforts to cool the property market are working. The city-state’s residential property index fell to 159.1 points last month after declining a revised 0.9 percent in September, according to the National University of Singapore’s Singapore Residential Price Index. The measure tracking prices in the central region decreased 1.4 percent in October.Record home prices amid low interest rates raised concerns of a housing bubble and prompted the city-state to introduce new taxes and higher minimum down payments since 2009 to curb speculation in Asia’s second-most expensive housing market. Home sales have been falling in the past four months after the government imposed new rules in June governing how financial institutions grant property loans to individuals.

“The latest statistics are a reflection of the current measures starting to bite the residential market,” said Alice Tan, head of consultancy and research at Knight Frank LLP in Singapore. “Price quantum is still the key consideration for many prospective homebuyers.”

Hong Kong

Singapore and Hong Kong, ranked by Savills Plc as the world’s most expensive housing market, have introduced measures to cool property prices. Singapore has linked borrowers’ maximum debt levels to their incomes and raised stamp duties and capital gains taxes, while Hong Kong has increased minimum down payments six times in less than three years and in February doubled stamp-duty taxes for all properties over HK$2 million ($258,000).

Li Ka-shing, Asia’s richest man, said his companies, including Cheung Kong Holdings Ltd. (1), Hong Kong’s biggest developer by market value, have slowed land purchases in the city and in China as prices have escalated to a high level.

Singapore’s home sales fell 19 percent in October to 1,009 units from a month earlier, according to data from the Urban Redevelopment Authority released Nov. 15. From the previous year, sales dropped 48 percent, the data showed.

An index tracking real estate developers in Singapore rose 0.3 percent at the close, the first gain in eight days. CapitaLand Ltd. (CAPL), Southeast Asia’s biggest developer, rose 0.3 percent to S$3.02, the first advance in almost two weeks. City Developments Ltd. (CIT), the second largest, climbed 1.6 percent to S$10.06, the biggest increase in seven weeks.

‘Priced In’

“We believe the October decline was already priced in,” Eli Lee, an analyst at OCBC Investment Research Pte, said. “After a seven-day losing streak, the property stocks were oversold, despite a fairly muted outlook, and we are seeing some buying on value alongside buoyant markets in Asia today.”

The MSCI Asia Pacific Index gained 0.7 percent, while Singapore’s benchmark Straits Times Index climbed 0.5 percent, both advancing the most in about two weeks.

Home prices in the island-state rose at the slowest pace in six quarters in the three months ended Sept. 30, according to figures released by the authority on Oct. 25.

Prices and transaction volumes of Singapore residential properties are expected to moderate for the rest of the year due to the cumulative impact of government property measures, CapitaLand said on Oct. 31. Developers are beginning to cut prices in existing and new projects, and take lower profit margins, City Developments said on Nov. 12.

Home prices have jumped 40 percent since the island-state started introducing curbs four years ago. The gains led to Singapore being ranked the most-expensive city to buy a luxury home in Asia after Hong Kong by Knight Frank in a wealth report in March.

Singapore’s private residential property price index rose 0.4 percent to a record 216.2 points in the three months ended Sept. 30, after climbing 1 percent in the second quarter, URA data last month showed. That was the smallest gain since the first quarter of 2012, when the index dropped 0.1 percent.

To contact the reporter on this story: Jasmine Ng in Singapore at jng299@bloomberg.net

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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