Singapore developer CapitaLand warns of headwinds as profit drops

CapitaLand, Southeast Asia's biggest developer, said prices and sales of Singapore residential properties would moderate because of government measures to curb speculation.

The company sold 139 residential units in the city state in the three months to June 30, 31 per cent fewer than in the same period last year, the firm said in a statement through the Singapore stock exchange yesterday.

Second-quarter profit fell 0.7 per cent on lower portfolio gains, it said. CapitaLand expected some headwinds for Singapore's private residential property market in the near term, its earnings statement said.

The Monetary Authority of Singapore (MAS) introduced a total debt servicing ratio cap of 60 per cent for property loans granted by financial institutions. This was expected to have an impact on residential property sales, CapitaLand said.

"Most developers have been cautious post the latest round of measures," Vikrant Pandey, a Singapore-based analyst at UOB Kay Hian, said.

Singapore home prices rose to a record in the second quarter, leading to the new measures at the end of last month.

Record home prices amid low interest rates raised concerns of a housing bubble and prompted the government to widen a four-year campaign in January to curb speculation in Asia's second-most expensive housing market.

In January, the government increased stamp duties for homebuyers. Singapore's central bank estimates that between 5 per cent and 10 per cent of borrowers have over-leveraged on their property purchases, with total debt service payments at more than 60 per cent of their income, MAS managing director Ravi Menon said on Tuesday.