1H10 GLS Confirmed List reinstated and IAS removed. To ensure a stable property market and prevent excessive speculation, the Government will (1) reinstate the Confirmed List for the 1H10 GLS Programme, (2) remove with immediate effect the Interest Absorption Scheme (IAS) and Interest Only Housing Loans and (3) end the Jan 09 Budget assistance measures for the property market upon their expiry in Jan 10 - 11. Aside from revealing the number of Confirmed List’s sites towards end-2009, the Government will increase the number of Reserve List’s sites from the current 16. IAS will still be allowed for projects where units have already been offered for sale under the IAS prior to the announcement. We think existing projects with IAS could see increased demand from buyers who remain comfortable with paying only 20% of sale price prior to TOP.
Not unexpected. Both measures (1) and (2) are in line with what Minister Mah previously suggested during the Jul – Aug 09, while we reckon measure (3) is comparatively less forceful. We also gather from recent showflat visits and talks with developers/agents that over the past few months more buyers opted for Normal Progressive Scheme over IAS given a 3 – 5% lower S$psf (where impact increases with size) and improved sentiments. Out of 10 buyers, 2 – 4 would choose IAS presently (vis-à-vis 6 – 8 previously). We expect measure (2) to drive out pure speculators with the sole intention of buying properties to sell within 2-3 years. This announcement and weakness within regional bourses should trigger a kneejerk sell-off of property stocks. But, we continue to see value in property counters given the upcoming IRs, improved macroeconomic signs, low interest rates and prime-luxury prices remaining 15 – 25% off 4Q07 peaks.
Hints of a sustainable mass-market demand. While the Government could have brought in the Confirmed List immediately and introduced more forceful measures to calm the current buying frenzy, we believe this could run counter to its overall cautious tone on the economy. Further, we view the Government’s measures as an indication that demand for mass projects is sustainable, especially when HDB prices continue to rise amid increased demand from locals and PRs. Without a healthy supply of mass-market sites, a subsequent hike in mass prices from current levels could further widen the gap between mass projects and HDB flats, thus delaying the Government’s vision of encouraging higher ownership of private homes.
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