Friday, October 5, 2012

Singapore takes new steps to cool housing market... How will property counters react on Monday?

Singapore takes new steps to cool housing market

Posted: 05 October 2012 1745 hrs

SINGAPORE: The Monetary Authority of Singapore (MAS) will restrict the tenure of loans granted by financial institutions for the purchase of residential properties, effective from 6 October.

MAS' move is part of the government's broader aim of avoiding a price bubble and fostering long-term stability in the property market.

The new rules impose an absolute limit of 35 years on the tenure of all loans for residential property. This will apply to loans to both individual and non-individual borrowers, as well as refinancing loans.

In addition, loans exceeding 30 years' tenure will face significantly tighter loan-to-value (LTV) limits.

Furthermore, MAS will lower the LTV ratio for new residential property loans to borrowers who are individuals, if the tenure exceeds 30 years or the loan period extends beyond the retirement age of 65 years.

For these loans, the LTV limit will be: 40% for a borrower with one or more outstanding residential property loans; and 60% for a borrower with no outstanding residential property loan.

The new rules will apply to both private properties and HDB flats.

"Over the last three years, the average tenure for new residential property loans has increased from 25 to 29 years. More than 45 percent of new residential property loans granted by financial institutions have tenures exceeding 30 years," MAS said.

"The new rules aim to curb continued upward pressure on residential property prices, driven by low interest rates and rapid credit growth," the central bank added.

Previous rounds of measures have had a moderating effect on residential property prices. There is also significant supply of housing that will come onto the market over the next two years.

However, prices in both the HDB resale market and private residential property have continued to rise in Q2 and Q3 of 2012.

Private home prices rose 0.5 percent in the third quarter from the April-June quarter, when prices increased by 0.4 percent, while HDB resale prices gained 2.0 percent quarter-on-quarter following an increase of 1.3 percent in April-June.

MAS will also lower the LTV ratio for residential property loans to non-individual borrowers from 50 percent to 40 percent.

For re-financing facilities, the rules will apply where the application date of such facilities is on or after 6 October.

The outstanding loan may be either a loan from HDB or a financial institution regulated by MAS.

Deputy Prime Minister and Chairman of MAS, Mr Tharman Shanmugaratnam, said: "Monetary conditions worldwide are far from normal. QE3 and low interest rates have made credit easy, but this will eventually change. We are taking this step now to require more prudent lending, and will continue to watch the property market carefully. We will do what it takes to cool the market, and avoid a bubble that will eventually hurt borrowers and destabilise our financial system."

QE or quantitative easing is an unconventional monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective.

- CNA/ir


  1. hey you have shared nice & very informative piece of information about loans for residential market. I think MAS has taken right step to avoid price bubble & bring stability in property market.

  2. MAS has done the right step, but the key question is will this work? I think this is the 6th cooling measure MAS has taken.

    Personally, I think this has some impart curbing demand (reducting LOV) but this is counteracted by the low interest rate which increase demand.

    Only in 2013/2014, when the supply of houses increase as new developments/flats come into the market. Then, the market will really start to cool.

    But to what extend will the market cool? will it be a soft/medium/hard landing? We shall see and perhaps only then would be a good time to consider getting into the property market.