Today I Learnt – Cooling Measures And Impact To Stock Prices

In the last 12 months, due to the rebound in property prices, more and more people are looking at purchasing their properties, as they have been waiting (and holding on cash) for the property market to bottom out.

With the rebound in property prices, these cash rich people then flock to snap up new property launches, getting their hands on any quality properties (arguably any properties in Singapore is of quality due to limited land).

Hence, the market saw an increase in property transactions, and subsequently, an alleged “excessive borrowings among Singaporean home-buyers”.

Earlier yesterday, the government announced that it is imposing an additional buyer stamp duty as a cooling measure to the property market in Singapore to mitigate this risk.

Here are the changes:

What this means is that, you need to pay more tax to get your property, and also the loan quantum that you are getting from the bank is lower.

The result to any property buyer now is that, you need to have even more cash on hand. Including the loan to value reduction and additional stamp duty, you might need to pay up to 10% more in cash for any property purchases!

The result to banks: lesser people will now buy properties, and they make lesser money from loan interest to those that can afford due to a lower loan amount available to the home buyers.

Hence, stock prices of local banks dropped earlier today as a reaction to the news. Stocks in the property sector also dropped.

CityDev, UOL, GuocoLand, CapitaLand all dropped.

DBS, OCBC continued to drop too.

Just bought into DBS earlier last month, might possibly be looking to buy in a bit more to average down my price.


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