Property Devt & Invt - CIMB Research 2017-03-11: Easing of property cooling measures

Property Devt & Invt - CIMB Research 2017-03-11: Easing of property cooling measures Singapore Property Developers Property Cooling Measures CAPITALAND LIMITED C31.SI CITY DEVELOPMENTS LIMITED C09.SI UOL GROUP LIMITED U14.SI

Property Devt & Invt - Easing of property cooling measures

  • The government has eased Sellers’ Stamp Duty for residential properties and Total Debt Servicing Ratio (TDSR) for mortgage equity withdrawal loans.
  • Immediate impact unlikely to be significant, but this move could boost sector sentiment.
  • Maintain overweight. Top picks are UOL, City Dev and Capitaland. 

Surprise revision of property cooling measures

  • The government has lowered the holding period for Sellers’ Stamp Duty (SSD) from the present four years to up to three years. In addition, the SSD rate of 4-16% has been reduced to 4-12%. 
  • These changes will apply to all residential properties purchased on or after 11 Mar 2017. However, no changes have been made to the Additional Buyers’ Stamp Duty (ABSD).

TDSR framework revised for mortgage equity withdrawal loans

  • The government will not apply the TDSR framework to mortgage equity withdrawal loans with loan-to-value (LTV) ratios of 50% and below. These loans are secured on the borrower’s equity in a residential property. 
  • Effectively, this will allow greater flexibility to borrowers to monetise their properties for other investments or uses.

Closing a loophole

  • The government will now impose normal property stamp duties on transactions involving the transfer of equity interest in an entity holding residential properties vs. a previous rate of 0.2% of NAV. As this will increase the cost of transaction, we believe the majority of bulk buyers would likely look for wider discounts on purchase.
  • However, we believe the slack could be filled by individual buyers as market sentiment improves.

A positive sign

  • While the adjustments to the SSD and TDSR are unlikely to have an immediate uplifting impact on residential prices, they are likely to send a positive signal to the market and boost sentiment, in our view. 
  • We believe buyers are likely to perceive the market as nearing the bottom and may be more willing to take a position in the market. 
  • Meanwhile, from the developers' perspective, this could also spur more interest in purchasing land sites to restock their low inventory pipeline.

Sector valuations

  • Beneficiaries of an improved residential market sentiment in Singapore include City Dev, UOL, Wing Tai, FCL (with greater residential exposure) and Capitaland, to a smaller extent. 
  • Property stocks are currently trading at 30% discount to RNAV. We see the improving residential sector fundamentals, with oversupply getting slowly digested, to be further supported by this latest move. 
  • We maintain our Overweight stance. 
  • Our sector picks are UOL, City Dev and Capitaland.

Highlighted companies 


  • ADD, TP S$4.19, S$3.70 close 
  • We like CAPL for its ROE-boosting capital recycling activities. The stock is trading at 12% discount to RNAV.

City Developments 

  • ADD, TP S$10.51, S$10.15 close 
  • Overseas and Singapore residential contributions to continue to underpin earnings growth. CIT’s active capital recycling and low gearing would enable the group to tap new investment opportunities.

UOL Group 

  • ADD, TP S$7.96, S$6.92 close 
  • UOL has a high recurring income base, underpinned by rentals, hotel operations and investment holdings. The stock is trading at 30% discount to RNAV.

LOCK Mun Yee CIMB Research | Yeo Zhi Bin CIMB Research | http://research.itradecimb.com/ 2017-03-11
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 4.190 Same 4.190
ADD Maintain ADD 10.510 Same 10.510
ADD Maintain ADD 7.960 Same 7.960