Yesterday, Mr Mah Bow Tan, the Minister for National Development, announced several measures that the government will be taking in an effort to cool the heated property sector. These measures include 1) reinstatement of the Confirmed List for the 1st Half 2010 Government Land Sales (GLS) Programme, 2) removal of the Interest Absorption Scheme (IAS) and Interest- Only Housing Loans (IOL), with effect from 14 Sep 2009 and 3) non-extension of the Jan 2009 Budget assistance measures for the property market when the measures expire.

Recent site sales had seen very strong interests from developers and the reinstatement of the confirmed list will ease the competition among developers to replenish their landbank. However, we think the impact of the removal of IAS on home buying is unlikely to be significant on buyers who are buying for own-stay purposes. Developers usually charge buyers 2%- 5% more on the purchase price if buyers take up the scheme. So effectively, it is just a deferment of the interest payment by the buyer. Over the recent months, there is also a trend where more buyers are opting for normal progressive payment instead of IAS to enjoy lower price. This implies that the influence of the IAS on the recent buying frenzy is not very significant. Nevertheless, we think these measures will still have a psychological impact on buyers who may be worried of more tightening measures that could be introduced in future. This will particularly affect property investors and speculators. We maintain our NEUTRAL rating on the sector.