Property (residential)

Property (residential): property stocks likely to take a hit on the govt's announcement late last night, of an additional stamp duty (ABSD) on residential unit purchases – marking a 5th round of cooling measures.
i) Foreigners and companies now have to pay an extra 10% stamp duty on residential property purchases;
ii) PRs buying their 2nd property or citizens buying their 3rd or subsequent residential units will be required to pay an extra 3% stamp duty.
The new rates apply from today.

In addition, the govt announced the supply of 7000 residential units through the 1H12 Govt Land Sales programme’s Confirmed List of 14 sites, well above Street forecasts of 3000 units. Taken together with the 7100 units on the Reserve List yield 14,100 units, broadly on par with 2H10. This adds to the record 37,000 residential units developers have in the pipeline seeking pre-requisite conditions to launch for sale, which will weigh further on launch prices.

Daiwa says the new property market cooling measure is "unexpected, and indisputably negative for sector" and "alone could send an immediate chill through the market, especially at the high-end segment."

Citi expects a significant decline in volume in the short term and believes this is likely to be the catalyst for price cuts in the prime districts. Expect all the developers to be sold down when the market opens. Tips Wing Tai and City Dev are the most sensitive to residential property segment (every 10% chg in price results in an estimated 6.1% and 4.1% change in NAV rptvly) and reiterates Sell on them.

StanChart notes this is the first time since 1996 that the govt has imposed stricter residential market measures on foreigners and permanent residents. Also, notes the ABSD is a tougher policy as it is levied on purchases regardless of the holding period. Expects the policy to induce a 20% decline in sales volumes in 1Q12, and catalyse a 20-30% decline in residential prices in 2012. Reiterates Underperform ratings on CapitaLand, City Dev and Keppel Land.