Shares of several Singaporean real estate developers tumbled on Friday, a day after a surprise government move to tighten curbs on property in a bid to cool the market.
On Thursday, Singapore authorities raised an additional stamp duty on property purchases by five percentage points for some home buyers and tightened housing loans limits.
The city-state's housing market has been recovering since the third quarter of 2017 after nearly four years of price declines. Private homes prices have risen by 9.1 per cent over the past year.
"To me, it is quite shocking," said Christine Li, senior director of research at real estate services firm Cushman and Wakefield in Singapore. "There will be a knee-jerk reaction in property stocks.
Property companies have been buying land in government sales or in collective sales, where they purchase existing apartment blocks for re-building.
Developers that have added significantly to Singapore residential landbank include Oxley, City Developments, Keppel's real estate division and Wing Tai, said Joel Ng, an analyst an KGI Securities.
Both Oxley and City Developments were down nearly 15 per cent, while Wing Tai fell 8 per cent.
Authorities have been cautioning as early as November against an "excessive exuberance" in the property market.
A fresh warning came this week, from the head of the Monetary Authority of Singapore, Ravi Menon, who said the recovery in the property market was welcome but should not veer too far from economic fundamentals.
Based on the land parcels that were sold in the past two years, there are some 28,000 to 30,000 private residential housing units that could be developed for launched in the next two years, said Nicholas Mak, executive director at ZACD.
"Private residential price growth will slow down and may even start to stagnate by the end of this year," he added.
MOVE TO COOL DOWN MARKET
A statement, issued jointly by the central bank and the ministries of finance and national development, warned that the rise in property prices must not "run ahead of economic fundamentals".
Allowing prices to surge unchecked could "raise the risk of a destabilising correction later, especially with rising interest rates and the strong pipeline of housing supply," the statement added.
The government raised by 5.0 percentage points the additional buyer's stamp duty (ABSD), a fee applied to the purchase price or current market value of a property, for Singapore citizens and permanent residents buying a second and subsequent house.
Citizens buying a third home and permanent residents buying a second home will now pay 15 percent in ABSD fees.
Foreign individuals buying any residential house must pay 20 percent and foreign entities 25 percent.
The loan-to-value limits for property purchases were also tightened by five percentage points.
"The revision to ABSD rates is likely to lead to a slowdown in the recovery of the private property market," said Lewis Ng, chief business officer of industry specialist PropertyGuru Group.
For example, a person looking to buy a second unit worth S$1.0 million (US$733,000) will have to pay an additional S$50,000 in cash, and a total stamp duty outlay of S$144,600, he said.
DBS Bank said the new cooling down measures caught the market by surprise.
But Ng said that "while this might be painful for home-seekers in the short term, it will enforce financial prudence and create a more stable property market".
Most Singaporeans and residents live in high-rise government-built apartment blocks or private condominiums.
The main Straits Times Index was down 2.22 percent after midday Friday, with property stocks among the top decliners.