SG Property

SG Property: Despite recent trends of some stabilization in the Singapore property market, the government has introduced another new set of regulations, targeting the Executive condominium (EC) segment. The latest measures involves three main measures; 30% Mortgage Servicing Ratio (MSR); second-time applicants who buy EC units to pay a resale levy; and lower cancellation fees. A summary of the latest measures are as follows: 1) 30% MSR: MAS will cap the MSR for housing loans granted by financial intuitions to individuals at 30% of gross monthly income, which was previously only applicable to HDBs, to encourage financial prudence amongst buyers. Previously, the total debt servicing ratio was applicable to EC buyers, where 60% of household income was eligible for usage to repay mortgages over a 30 year period. 2) Resale levy for second-timer applicants: Second-timer applicants who now buy EC units directly from property developers will have to pay a resale levy, which is similar to second-time applicants for BTO flats. The levy ranges from $15,000 to $50,000, depending on the flat type of their first property. 3) Lower cancellation fees: EC Buyers who cancel their purchase would now pay a cancellation fee of just 5%, as opposed to the previous 20%, so as not to burden young couples who are unable to proceed with their marriage and hence their EC purchase. Following the latest set of measures, investors could expect the eligible pool of EC buyers to potentially shrink further, causing near-term negative sentiments on the residential sector. Overall, Maybank-KE expects private property prices to correct by 5-10% in 2014. The house reiterates CapitaMalls Asia (Buy, TP $2.51) as its top sector pick in view of its predominantly retail mall exposure. The house also continues to like CapitaLand (Buy, TP $4.10) and Keppel Land (Buy, TP $4.80) for their diversified operations across geographies and asset classes