A Tumble in Banks & Property Stocks

On the evening of 5th July, the government of Singapore announced special measures for the property market. As a result, there was a further decrease in the property and bank stocks.
Soon after this announcement, companies started reducing their trade prices. Few of the companies are mentioned below:

– City Developments experienced a decrease in stock value by 17% and it was traded at S$9.30

– Trades of UOL Group collapsed down by 12.65 percent. Thenew value was S$6.77. This allowed them to recover their previous losses

– Oxley Holdings reduced by 14.63 percent after which the prices shed to 35 Singaporean cents. It was among the heaviest trade as the turnover was of 22.39 million

– CapitaLand was trading at S$3.01 after the reduction of 5.35 percent

– The Real State Agency PropNex took a spill of 13 Singaporean cents and was traded at 56 Singapore cents

– APAC Realty dropped down by 21.15 percent and the price reduced to 61.5 Singapore cents

On Monday, PropNex stepped into the Singapore Exchange holding a per-share IPO price of 65 Singaporean cents.

There were many statements passed by analysts and real estate groups. OCBE research analyst, Andy Wong, demoted his grades for the residential properties to neutral, overweight. He said that if a market faces such small problems, then the tone of the market has higher chances to change. He also said that the property developers might face major problems if the issue doesn’t end.

He further admitted that the cooling measures announced in January 2013 were better as compared to the new one. He referred to shares of FSTREH, which had declined to 28 percent within the period of 37 months.
RHB analyst, Vijay Natarajan,addedthat the new measures will affect the property market in an unthinkable way. He said that they are expecting to see an inconsiderable reaction in the property market. The share will have a 5 to10 percent of corrections and the developers that hold bigger shares in the property will have a bigger effect.

The authorities that are said to follow the economic fundamentals are also supposed to follow the new measures. This includes ABSD rates and LTV limits, which are applied on properties. The ABSD rates for permanent residents will remain from 0 to 5 percent on buying their first residence while people who are buying the second one will pay an increment of 5 percentage point in the ABSD. Foreigners are affected the most as they have to face 20 percent ABSD, which changed from 15 percent.

After the implementation of the new LTV rules, 75 percent of the first-time buyers will be affected as there will be an increase in the initial amount of the property purchase.

The three local banks also faced a downfall on Friday. Below are the banks with their rates
– DBS tumbled from 3.19 percent to $25.21
– UOB dropped from 3.58 percent to $26.12
– OCBC went down from 2.61 percent to $11.20

Analysts are of the view that these local banks can also face effects of the new cooling measures. However, it could be beneficial as they will see a rise in the interest rates.

RHB analyst,LengSengChoon,expressed the opinion that UOB has higher chances of facing the negative impacts within a short period of time as their exposure is high in terms of housing loans.
OCBC Investment Researcher, Carmen Lee,added that the new measures won’t affect the mortgages portfolio of the local banks.Instead, they might face a slower growth in terms of loans; slowing down the property transactions.






Some of the new launch condos by these developers include