SINGAPORE (Feb 20): Global investment bank Jefferies says the increase in buyer’s stamp duty for residential properties in Singapore announced at Budget 2018 on Monday could put a slight dent in developer margins, but is unlikely to put the brakes on positive sentiment.
“While the budget measures are marginally negative for developers, sentiment may not be adversely impacted. There may be slight dent in margins, and overall demand may be supported by other countervailing factors like rising household income, broad-based economic growth and still-low rates,” says analyst Krishna Guha.
Finance Minister Heng Swee Keat yesterday said the government will be raising the top marginal buyer's stamp duty (BSD) rates for residential properties by 1 percentage point to 4%.
Starting today, the higher top marginal rate will apply to the portion of a residential property’s value exceeding $1 million.
The increase will impact direct purchases, as well as purchases through share transfers in companies primarily holding residential properties.
See: Top marginal buyer's stamp duty for residential properties raised to 4%
Guha notes that developers’ margins will take a “slight hit” should they choose to absorb the increase in stamp duty. “For future en bloc, especially involving larger sums, developers need to factor the hikes in bid price,” he adds.
However, the analyst highlights that the higher stamp duty is more than a revenue measure for the government than a demand cooling measure.
“The impact is mild on mid-end property purchases. Given the buoyant sentiment and bullish land bids by developers, expectation of future price increase may exceed the impact of higher stamp duties,” Guha says.
As such, Jefferies is keeping its “buy” calls on Wing Tai Holdings and City Developments with target prices at $2.88 and $14.80, respectively.
As at 12.49pm, shares of Wing Tai are trading 4 cents down at $2.21 while shares of CityDev are trading 28 cents down at $12.62.
