We believe that the introduction of the Additional Buyers' Stamp Duty (ABSD) had exacerbated the decline of the private property market in Singapore. Under this rule, foreigners are required to pay an additional 10 percent stamp duty when acquiring residential property. PRs who purchase second and subsequent homes and Singaporeans who buy third and subsequent homes have to pay an extra three percent stamp duty.
Though some investors thought that money could still be made in properties even with the slowing down of the global stock market, we believe otherwise. It is observed that the fate of these two markets is intertwined and it is just a matter of time before the property market will follow suit the stock market. We estimate that the property market might decline as early as first quarter next year, with a time lag of six months in between each other. This is due to the dissipating 'wealth effect', possible credit crunch and the uncertainty of the economy ahead. Moreover, as an open economy, Singapore is susceptible to the outflow of capital which is always in search of higher yield. We estimate that the property market will only recover at least six months to one year after the stock market has rebounded from its low.
We also believe that the ROEs of the property developers will be adversely affected and continue to underweight property sector, particularly City Development and Ho Bee with its concentrated portfolio. It is not advisable to bottom-fish now unless investors are prepared to wait.
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