New home loan rules may cause 15% fall in demand: analyst

Property analysts said the new property loan curbs could cause housing demand to drop by up to 15 per cent over the next few months.

On Friday evening, Singapore’s central bank introduced a Total Debt Servicing Ratio (TDSR) framework and tighter Loan-to-Value (LTV) limits on housing loans.

Analysts said these new rules, which take effect on Saturday, will hit property investors the hardest.

Property analysts said the new rules will not significantly affect genuine house hunters, or those looking to upgrade from their HDB flats.

By Saturday evening, all 738 units at private residential project J Gateway were snapped up.

Over at the Jewel, Buangkok’s new condominium, 80 per cent of its 350 units were sold.

But it is a different story for property investors looking to buy a second or third property.

Mohamed Ismail, CEO of PropNex, said: “Who will be affected? The so-called greater-risk appetite investors. I will not be surprised if the volume of transactions dip by a good 10 to 15 per cent. The 10 to 15 per cent I’m expecting is an immediate reaction to the cooling measures. But in the long term, I think the market will stabilise as people try to plan within the parameters that have been provided. Overall in the longer term, (there will) probably be a 5 per cent dip in the market as some of these investors will be out of the opportunity to buy more properties.”

The TDSR framework will apply to loans for the purchase of all types of property, loans secured on property and the re-financing of all such loans.

Analysts said these latest measures will also close loopholes used by some investors to circumvent the existing rules.

Steven Tan, managing director at OrangeTee, said: “The refinement of the Loan-to-Value rules will make sure that the buyers will not be able to make use of the loopholes, such as using another person’s name to avoid paying additional buyer’s stamp duty or to secure a higher Loan-to-Value. It will also make sure that they won’t use another younger borrower’s name to secure a longer loan period.”

Mr Ismail said: “Parents who are of the older age buy properties under their children’s names and some are still studying, above 21 and not even having an income… In some instances, they even buy the property in someone else’s name so as to avoid the Loan-to-Value. Because once you have a second property or a third property, your Loan-to-Value ratios drop drastically.”

The Monetary Authority of Singapore (MAS) said the move aims to encourage financial prudence and cool demand.

David Teo, a potential property buyer, said: “If you have a car now, maybe with the 50 per cent down payment and with the car prices now, then of course more of your income will be locked up in your car. But if you got your first house, then if you’re really stretching yourself, then you shouldn’t really go for it.”

MAS said any property loan should not push a borrower’s total debt obligations to above 60 per cent of his or her gross monthly income.

Source : Channel NewsAsia – 29 June 2013

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