FRESH SINGAPORE CURBS ON PUBLIC HOUSING MAY HIT WIDER MARKET

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New curbs on Singapore’s public-housing market are likely to drag down demand in the broader real-estate sector, analysts say, as regulators take steps to rein in rising home prices in the city-state.

Tuesday’s measures – which tightened mortgage terms for state-built homes and delayed public-housing eligibility for certain non-citizens – follow a series of government curbs that stretch back over four years. It also prompted some investors to sell off their stakes in Singaporean property developers on Wednesday, amid a broader market slump.

“We see no positive implications for home prices after the announcement,” David Lum, a property analyst at Daiwa Capital Markets, said Wednesday in a note to clients. “It does not look to us as if policy risk will decline in Singapore unless there is a significant price correction.”

Under the new rules imposed by the Housing and Development Board (HDB), households with permanent residency, or PR, status can only buy previously owned state-built homes if they have held PR status for at least three years. Permanent residents, who made up 10% of Singapore’s population of 5.3 million people in 2012, could previously buy a HDB flat from the resale market immediately after getting PR status.

The board would also offer public-housing loans with a reduced maximum tenure of 25 years, down from 30 years. Public-housing mortgage payments would be capped at 30% of borrowers’ gross monthly income, down from 35%.

These steps are “negative” for Singapore’s private-home market, “given that upgrader demand has contributed to a significant portion of mass-market private residential housing demand,” according to Adrian Chua and Ivan Lim, property analysts at Citigroup. About 83% of Singapore’s resident population of 3.82 million people, including permanent residents, live in HDB-built homes.

A weaker public-housing resale market “will impinge on upgrader households’ ability to monetize their flats” to buy private homes, they said in a Tuesday note.

Analysts flagged the new three-year waiting period for permanent residents as a potent, even “surprise” move.

“It is likely to cool the resale HDB market immediately since it will remove a major source of demand from the market,” Mr. Lum of Daiwa said.

The measures come as some Singaporean developers feel the pinch from earlier curbs. Wing Tai Holdings is likely to shy from bidding in new state land tenders in the second half of this year, its chairman said Tuesday, citing concerns over recent property-market curbs and signs that the ultra-low interest rate environment may soon end.

“Judging from the land available for the next six months [and] the price of land at this level, we most probably would have a more ‘wait-and-see’ attitude,” Cheng Wai Keung said at a news briefing before the HDB announced its new measures.

“Investments have to be more opportunistic,” said Mr. Cheng. About 61% of Wing Tai’s 5 billion Singapore dollars (US$3.9 billion) worth of assets are located in Singapore.

Tuesday’s measures come after the Monetary Authority of Singapore in June tightened rules on property loans, and closed loopholes that allowed some homeowners to circumvent loan restrictions and avoid paying levies when buying additional property.

The central bank’s move, aimed at curbing “imprudent” lending ahead of an expected rise in interest rates, triggered a slump in sales of new private homes in July, when monthly transactions fell to the lowest level in more than three and a half years.

As the HDB’s steps come hot on the heels of the MAS measures, “we believe that the negative knock-on effects across property segments could be more direct and more immediate,” Mr. Lum said.

Singapore regulators have repeatedly tried to rein in housing prices that have risen almost nonstop since the city-state’s economy began recovering from the global financial crisis.

But prices of public and private housing still rose to records in the second quarter, despite a series of government curbs – including a tough set of controls imposed in January – that began in September 2009.

Prices of resold public housing rose 0.5% in the second quarter from the preceding three months, and marking the 17th straight quarter of increase. Meanwhile private-home prices climbed 1% in the April-to-June period from the previous quarter, the fifth straight quarter of gains.

The recent curbs, however, could keep prices in check in the coming months, analysts say.

Daiwa’s Mr. Lum kept a “negative” rating on Singapore property developers, while Citigroup’s Messrs. Chua and Lim flagged a “weaker medium-term outlook” for the city’s residential market.



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