Income ceiling hike within market expectations

Income ceiling increased from S$8,000 to S$10,000 for BTO flats and from S$10,000 to S$12,000 for executive condos.

According to OCBC, the ceiling hike and increased BTO supply could have heavier back-loaded effects on mass-segment private residential prices through the rental rate mechanism.

Here’s more from OCBC:

At the Nationally Rally speech, the Prime Minster announced the income ceiling hike from S$8,000 to S$10,000 for build-to-order (BTO) flats and from S$10,000 to S$12,000 for executive condos (ECs).

In addition, the pace of BTO supply would be maintained into FY12 at 25,000. We believe these measures are within market expectations. The immediate impact of the ceiling hike on private residential market sales volume would likely be limited.

However, we believe the ceiling hike and increased BTO supply could have heavier back-loaded effects on mass-segment private residential prices through the rental rate mechanism; i.e., as the increased supply of housing exerts downward pressure on HDB rentals, mass-segment private rentals and value would likely fall as well.

Given the current global economic uncertainties and potential softening in the private residential market, we like CapitaMalls Asia (CMA) for its current valuation and have a BUY rating at a fair value of S$2.09.

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