SINGAPORE — The high-end property segment will likely be more affected by the latest round of cooling measures compared with mass-market projects, industry insiders said.
Buyers and investors hoping for private home prices to drop sharply due to the measures will not be seeing that happen in the near term, as developers said that they are not going to cut prices massively.
Mr Richard Lai, group chief financial officer of property developer GuocoLand, said that there is "no intention" to slash property prices, but developers such as his company will have to be "more flexible" when selling units less attractive to buyers.
Top executives of property investment firms were part of a panel discussing the trends and future of real estate on Thursday (July 12), as part of the OCBC Global Treasury Economic and Business Forum held at The Ritz-Carlton hotel.
Besides Mr Lai, Mr Andrew Lim, group chief financial officer of CapitaLand, and Mr Wong Mun Hoong, group chief financial officer of Mapletree, were also part of the panel.
Commenting on the recent property cooling measures, Mr Lai said that with mass-market properties, there will be more first-time Singaporean buyers getting these for their first home, so they are not going to be deterred so much by the higher Additional Buyer's Stamp Duty (ABSD).
However, for the higher-end properties, "the initial reaction of any investors, most of which will be foreigners, is that they will hold back, wait and see", he added.
"The higher-end market products will have a different target market and, therefore, will have very different reactions than the more mass-market ones," he said.
Last Thursday, the Government raised the ABSD rates on residential property purchases. Singaporeans buying their second home will now have to pay a duty of 12 per cent (up from 7 per cent) on the purchase price, or the current market value of the property, whichever is higher.
For permanent residents buying a second property, the rate is 15 per cent (up from 10) and for foreigners buying any property, it is 20 per cent (up from 15).
Following the surprise announcement, several developers reported a tumble in stocks last Friday.
Property analysts said that developers would be hard hit due to the changes in land acquisition costs — they must now pay a 25 per cent duty based on land cost, instead of the previous 15 per cent.
Asked how the new measures will affect profit margins and prices, Mr Lai gave a positive outlook.
"If we compare (with figures from) a year ago, I would say that our margins have improved a lot, so if I have to absorb 5 per cent (in duty), it's not going to hurt us badly. It means that we will make less money, but it doesn't mean we'll end up losing money."
However, he said that "whether are we going to do that is another question altogether".
"Are we going to be a little bit more lenient in pricing in view of the new measures? Yes, we have to be more flexible. But are we going to do massive cuts? No. For the less advantageous units, we'll have to be more flexible," he added.
The panellists had different views about why the cooling measures were introduced.
The Real Estate Developers' Association of Singapore (Redas) earlier called the measures "tough", pointing out that the property market is "in the early stages of a recovery and the recovery is in line with economic fundamentals".
Mr Lai agreed that the move "wasn't necessary", but added that it was open to debate. "I think where the regulators are concerned… they were seeing price escalation and bids in places where they didn't expect to get bids, and (for) prices to be so high."
Mr Lim believes that the authorities were looking to curtail early the trend of rising property demand.
"I hate to say it, but we are architects of our own situation," he said, attributing the high demand to speculative buying, "where people are buying their second and third homes".
"(The Government) is seeing private property prices coming up quickly in a short time, (even) after multiple levels of cooling measures… their efforts being wiped out in less than 12 months.
"They have seen this trend and are trying to nip it early in the bud," Mr Lim said.
On what are their plans ahead, the panellists said that they will continue to set their sights overseas.
CapitaLand will continue to focus its overseas business in Vietnam and China, Mr Lim said.
"When we look at a city like Ho Chi Minh, it reminds us of Shanghai 10 to 12 years ago — demographically very exciting, a lot of foreign direct investment coming in, and the Vietnamese government takes a sensible and practical view in developing the property market and building safeguards."
Mr Wong said that Mapletree intends to grow deeper roots in economies where it already has presence. "We are in 12 economies so far, the United States, China. The next step is to get deeper, but Asia remains the core."