On Thursday evening, the government announced a new series of property cooling measures which took effect on Friday, citing a sharp 9.1% rise in private residential prices over the past year and growing transaction volumes. The measures include significantly higher ABSD rates on property transactions and tighter loan-to-value (LTV) limits.
Except for Singaporeans and Permanent Residents purchasing their first residential property, property buyers have to pay an additional 5% in Additional Buyers’ Stamp Duty (ABSD) when purchasing new properties, while entities would pay an additional 10%.
Property buyers will also face additional restrictions when taking out a mortgage, as the LTV limits were tightened by 5% for all housing loans.
The government said the move was necessary to prevent a possible property bubble which will result in a destabilising correction, especially with higher interest rates and higher housing supply.
Anxious buyers hoping to avoid the higher duties scrambled to condominium showrooms at the eleventh hour, snapping up over 1,000 condominium units on Thursday evening alone before the midnight deadline when the new rules will kick in.
On Friday, investors reacted to the announcement negatively, with the SGX falling by 2% to close at a 14-month low of 3,191.82 points as property and bank stocks took a beating. Thursday’s announcement dampened investors’ enthusiasm in the property sector, with some stocks posing double digit declines to reach new lows on Friday.
In May, we wrote about how property firms were gearing up for expansion on hopes of a property boom. Thursday’s cooling measures are meant to temper that exuberance.
For this week’s edition of 4 Stocks This Week, we will analyse four of the most impacted property stocks this week.
APAC Realty (SGX: CLN)
APAC Realty is a real estate agency which offers property brokerage services in Singapore under the ERA brand.
On March 14, APAC Realty signed an agreement with Chinese overseas real estate company MLN Overseas (Singapore) to manage its clients’ properties in Singapore, Malaysia and Thailand. This is expected to be a new source of revenue for APAC Realty, as high-net worth Chinese buyers pile into Southeast Asian real estate.
In May, APAC Realty reported that its net profit for Q1 2018 jumped by 46.9% year-on-year, increasing from $4 million in Q1 2017 to $5.9 million in Q1 2018. This strong improvement in net profit was driven by higher revenue, which grew from $67.1 million in Q1 2017 to $105.2 million in Q1 2018, thanks to higher brokerage income from the resale and rental of properties, and new home sales of $37.6 million.
In June, APAC Realty announced its plans to purchase a commercial property in Toa Payoh to serve as its new headquarters for $72.8 million, with unoccupied space leased to third-party retailers. APAC Realty said revenue earned from leasing is expected to cover the operating costs of the property.
APAC Realty shares plunged by 25.4% on Friday, reaching a new low for the stock. From its highest point of $1.26 a share in 9 March 2018, APAC Realty has declined by 53.9%.
With a market cap of $192.4 million, APAC Realty’s share price closed at $0.58 this week.
PropNex Realty (SGX: OYY)
PropNex is a real estate agency which provides real estate brokerage services and project marketing. It was traded on the SGX Mainboard for the first time on Monday.
In June 2017, PropNex merged with Dennis Wee Group (DWG) to create Singapore’s largest real estate agency with nearly 7,000 salespeople. This put PropNex ahead of its largest rival ERA Realty Network, which had 5,882 agents in January 2018.
According to PropNex’s Intial Public Offering (IPO) Prospectus, PropNex holds a 42.7% market share in the Residential Primary Private Market and 45.3% market share in the Residential HDB Resale Market. Its gross profit has increased from $19.1 million in FY2016 to $33.8 million in FY2017, reflecting a 77% increase from the previous year.
PropNex raised $38 million through its IPO, which saw its public offer tranche oversubscribed by 24.6 times, reflecting the high hopes of retail investors. Retail investors who had missed out on the IPO were keen to get on the action, which was reflected in its opening price of $0.685 per share, 5.38% higher than its per-share IPO price of $0.65.
However, PropNex shares plummeted by 24.6% on Friday, falling well below its IPO price. This was despite the efforts by PropNex’s stabilising manager UOB Kay Hian, which purchased 4,650,000 shares within the $0.60 to $0.635 price range.
With a market cap of $192.4 million, PropNex’s share price closed at $0.52 this week.
Oxley Holdings (SGX: 5UX)
Oxley Holdings is a property developer based in Singapore, with a presence in over 12 geographical markets.
In April, Oxley reported that its net profit for the third quarter ended March 31 slumped 33% year-on-year (YOY) to $30.6 million. This was on the back of weaker revenue, which resulted from Oxley not having any major project completions compared to the same period in 2017 which saw the completion of the Oxley Tower.
Oxley announced in June that it successfully sold off all 170 units of The Vernandah Residences, its first residential project launched in Singapore this year within three months of its official launch. This helped Oxley rake in $248.8 million of revenue.
Oxley was a key beneficiary from Thursday’s property mania, successfully selling 510 units at its 1,472-unit Riverfront Residences project located in Hougang in just one day. However, as Oxley has over 3,800 units in the pipeline for the Singapore market, this may not be enough to fend off the effects of newly introduced property cooling measures.
Faced with Friday’s selloff, Oxley spent over $690,000 to buy back 2,000,000 shares, but this failed to reverse the steep decline in Oxley shares, which sank 15.9% on Friday.
With a market cap of $1.4 billion, Oxley’s share price closed at $0.345 this week.
City Developments Limited (SGX: C09)
City Developments Limited (CDL) is a global real estate operating company with a presence in 28 countries and regions.
In May, CDL reported strong revenue growth of 35% to $1.1 billion for Q1 2018. This strong performance was driven by the completion of The Criterion Executive Condominium (EC) in Yishun. However, net profit fell 16.3% from $95.6 million in Q1 2017 to $80 million, brought down by lower profit margins for the Criterion EC versus other projects.
CDL launched its Phase 2 of its luxury freehold development New Futura on 15 May, after it successfully sold 97% of units launched in Phase 1, including a $36.3 million penthouse. However, CDL said profits from New Futura will only be booked when its sale of the units is legally completed.
The Tapestry, a CDL condominium located in Tampines, was Singapore’s best-selling residential development for the month of March.
Executive Chairman Kwek Leng Beng said CDL has expanded its total Singapore residential pipeline to 3,000 units and will continue to pursue both organic and acquisitive growth opportunities.
Despite CDL’s bold expansion plans, investors were spooked by property cooling measures, causing CDL shares to closed by 15.6% lower on Friday, the lowest since March 2017.
With a market cap of $8.6 billion, CDL’s share price closed at $9.46 this week.
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