S-Reits take post-Budget hit; impact on developers mixed

SINGAPORE-LISTED property-related counters finished in a sea of red on Wednesday (Feb 15), as investors processed the latest Budget moves, including a higher Buyer’s Stamp Duty (BSD) and more housing grants.

The changes are expected to affect 60 per cent of non-residential properties and may hit harder in the en bloc market as well as impact big-ticket, billion-dollar deals.

Singapore-listed real estate investment trusts (Reits) and property developers took a beating during the Wednesday trading session, while property agencies were mixed before ending lower.

CapitaLand Integrated Commercial Trust was down 2 per cent to S$1.92, while Mapletree Pan Asia Commercial Trust fell 2.9 per cent to S$1.64. Other Reits with industrial, logistics and office portfolio properties also finished the day lower.

OCBC Investment Research said the changes in BSD and Additional Conveyance Duties for Buyers (ACDB) could potentially have a negative impact on S-Reits with exposure to Singapore, especially the pure-play Singapore-focused Reits, given that they would need to incur a higher capital outlay in the acquisition of non-residential properties.

Property developer City Developments Limited fell as much as 3.4 per cent shortly after the market opened. It closed 3.2 per cent lower at S$7.87. The same downtrend was observed for UOL , which was down 1.3 per cent at S$6.82, as well as GuocoLand , which lost 2.5 per cent to close at S$1.59.

DBS Group Research sees minimal impact from higher BSD for property developers, while JPMorgan believes the increases in taxes are manageable. Transaction velocity will also see little impact as demand drivers for such properties persist.

Property agency PropNex closed 2.4 per cent lower at S$1.63, while Apac Realty finished 0.8 per cent lower at S$0.615, despite seeing some gains during the trading session. DBS said the additional housing grants announced during the Budget should help boost demand for resale flats, which should be mildly positive for property agencies.

In his Budget speech on Tuesday, Finance Minister Lawrence Wong said the government will introduce a higher marginal BSD for higher-value residential and non-residential properties. The change takes effect on Feb 15.

For non-residential properties, the portion of the property’s value in excess of S$1 million and up to S$1.5 million will be taxed at 4 per cent, while that in excess of S$1.5 million will be taxed at 5 per cent – up from the current tax rate of 3 per cent.

Correspondingly, the ACDB, which applies to qualifying acquisitions of equity interest in property holding entities, will be raised to as much as 46 per cent, from up to 44 per cent.