SG Banks: Credit Suisse examines the potential relaxation of property cooling measures in Singapore and how it would impact the banking industry.
Possible property price declines of 5-10% in 2016E arguably sets the stage for recalibration of stringent property measures in 2H16E. With home ownership rate of 90%, large corrections in property prices would not be tolerated. This is especially when residential property represents 46% of household assets.
Overall mortgage affordability remains manageable even if rates do increase. This is unlikely to have any significant effect such as distressed sales and price declines in the secondary market. After eight rounds of property cooling measures implanted by the government from 2009 the time is right to ease off these cooling measures as the policies have been successful in decreasing speculative activity in the market. The Monthly sub- sales now at 2-4% and foreign demand being curbed significantly as overall foreigner demand only at 4%.
The government has recently highlighted that property prices have increased at a faster rate compared to income and that gap must be closed. However from the long term perspective incomes have generally kept up with the property prices.
A potential relaxation of market cooling measures would bring about positive sentiment around
Overall, DBS remains the most mortgage resilient asset quality performance with a current share price of $16.90 and a TP of $22.00. While the house has a neutral rating on UOB with TP of $22.80. OCBC is rated at neutral with a TP of $9.90.