Property Stocks

Extract fm Report by GKGoh dated 20-July,

Latest government measures will give a fillip to residential property segment.
The government has just announced changes to its property policies, covering three major areas:

1. caps on bank financing for residential properties;
2. limits on the use of CPF funds for property purchases; and
3. restrictions on foreign ownership of lands and properties (details in the Appendix).

Although the government said it is not looking to stimulate the local property market, our view is that the net outcome of the changes will be mildly positive for the residential property market, especially the lower- to mid-price range of the market.

Why now?
Our guess is that the government believes there is sufficient slack in the property market. As at end-Mar 05, there were 19,790 units of completed but unoccupied private residential units, or 8.8% of the total stock. This overhang has been keeping overall property prices in check despite the steady progress of the Singapore economy over the past two years. With General Elections around the corner, the timing for change could not be better.

The key positive for the property sector is the improved cash affordability that comes from two measures:

1. a higher Loan-to-Value (LTV) limit for housing loans (up from 80% to 90%); and
2. a lower cash payment requirement for private residential and HDB homes from 10% to 5%.

This improved affordability will help boost buyer sentiment, especially in the lower-end market, which has been lagging behind the higher-end market this year. With stabilised HDB prices, current owners may potentially upgrade to private properties. With the reduced cash down payment requirement, more first-time buyers can directly migrate to lower-end private properties.

Developers which are most geared to the lower to mid-end markets are City Developments (CIT SP, S$8.85, Hold), Allgreen (AG SP, S$1.27, Hold) and MCL Land (MCL SP, S$1.50, Hold).

In addition, foreign buying is expected to increase with the relaxation of rules on foreign ownership. These will benefit higher-end developers such as Wheelock Properties (WP SP, S$2.90, NR), Wing Tai (WINGT SP, S$1.18, NR) and Keppel Land (KPLD SP, S$2.98, Buy).

Another Report by DBSVickers dated 20-Jul here. Extract fm this report,

Disclaimer : Above Materials are Meant to be used for Reference ONLY. It does not represent a recommendation from any of us