Singapore Government Announced Property Cooling Measures

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Re: Singapore Government Announced Property Cooling Measures

Postby candy_chia » Sun Oct 07, 2012 3:52 pm

Have property investors prepared for the worst scenario? What will happen if interest rate escalate to 4% (from current 1 plus percent interest rate) & rental income tumble?

Home buyers unfazed by new restrictions on home loans
By Rachel Chang & Amanda Tan , Published on Oct 07, 2012, The Straits Times

Despite new restrictions on the length of home loans that took effect yesterday, house hunters did not stay away from condominium showflats islandwide.

At new launches like Riversails along the Punggol waterfront and Cityscape at Farrer Park, showrooms were packed and agents said that business was brisk.

At a 748-unit development in Bedok South called eCO, for example, at least 20 units were sold yesterday.


The Monetary Authority of Singapore (MAS) said on Friday that it was capping the length of a home loan at 35 years.

It also lowered the loan limits for those who take loans past 30 years, or which extend beyond the retirement age of 65.

~~ Such buyers can take a loan of only 60 per cent of the property's value, down from 80 per cent, starting yesterday.

~~~ This means an upfront payment in cash of 40 per cent of the property's price.

~~~~ If it is their second or more loan, the loan limit shrinks further to 40 per cent - they must fork out a cash down payment of 60 per cent of the property's value.

House hunters The Sunday Times spoke to yesterday said they were aware of the latest changes but they were undeterred.

Mr Ding Ming, 39, signed an option to purchase a two-bedroom unit at Riversails.

And because it is his second property in addition to his HDB flat, he could take only a 25-year loan - as a longer one would mean paying in cash a down payment of 60 per cent of the condominium's value.

"The rental from my HDB flat will cover it," said the engineer. "Anyway it's not a good idea to take too long a loan."

At Cityscape, technical manager Kenny Kam, 42, who was applying for a 30-year loan said he did not have any problem paying the required 40 per cent down payment.

"I have the liquidity, and it's better than putting the money in the bank because interest rates are so low," he said.

At the showrooms, the MAS announcement was a constant topic.

Agents were overheard assuaging buyers' fears that property prices may fall due to the measures.

"In 2010 and 2011, nothing happened," said one, referring to the cooling measures levied in the last two years by the Government.

Developers did not yet offer special perks or discounts to buyers to take the sting out of the new restrictions.

"This would be premature and too much of a knee-jerk reaction," said SLP International's research head Nicholas Mak. "I don't expect them to give perks and discounts until demand drops and puts them under pressure."

House hunters were sanguine, for the most part. At Skies Miltonia, Madam Wendy Tang, 44, who works in the education sector, said that she had always planned for a short-term loan "because I don't know what will happen in the future".

But there were some who breathed a sigh of relief that they had dodged the new rules.

Mr Clarence Wu, 45, was at the Riversails showroom with his family. He had purchased a three-bedroom unit two weeks ago at its soft launch, but was there to show his parents the unit he had chosen.

"If the announcement happened two weeks ago, I wouldn't buy because I would have to put too much cash down," said the forex trader, who also owns an HDB flat.

He took a 30-year loan for his new condo with a 20 per cent down payment; under the new rules, he would either have to take just a 20-year loan, or put down 40 per cent down payment in cash.

"I'm lucky I just escaped," he said with a smile.
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Re: Singapore Government Announced Property Cooling Measures

Postby candy_chia » Wed Oct 10, 2012 11:59 am

Below is a diagram extracted from Kim Eng research report, pertaining to the latest cooling measure announced by MAS on 6 Oct 2012:

6th cooling measure.png
6th cooling measure.png (91.7 KiB) Viewed 17023 times


http://www.kimengresearch.com.sg/

candy_chia wrote:
The Monetary Authority of Singapore (MAS) said on Friday that it was capping the length of a home loan at 35 years.

It also lowered the loan limits for those who take loans past 30 years, or which extend beyond the retirement age of 65.

~~ Such buyers can take a loan of only 60 per cent of the property's value, down from 80 per cent, starting yesterday.

~~~ This means an upfront payment in cash of 40 per cent of the property's price.

~~~~ If it is their second or more loan, the loan limit shrinks further to 40 per cent - they must fork out a cash down payment of 60 per cent of the property's value.

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Re: Singapore Government Announced Property Cooling Measures

Postby candy_chia » Wed Jan 09, 2013 7:35 am

New cooling measures possibly looming: experts
Jan 8, 2013

By Shabnam Muzammil: Recent comments by National Development Minister Khaw Boon Wan on the issue of expensive executive condominiums (ECs) could be a sign that the government is looking to implement another round of property cooling measures.

At a DTZ seminar held earlier today, the consultancy revealed that demand for ECs is at an all-time high due to potential gains and the narrowing price gap between ECs and mass market condos.

Lee Lay Keng, Associate Director, Research at DTZ noted that there is a large pool of EC buyers and the pipeline of ECs was close to its peak (7,000 units) in the middle of last year. "It hit one of its highest levels in Q2, and despite six rounds of cooling measures, demand still remains strong."

Lee noted that Mr Khaw's statement might be indicative of potential curbs.

~~ "Something to look out for would be the government's implementation of making EC open spaces chargeable to developers," she said.

~~~ Ong Choon Fah, Head of Consulting and Research, also speculated that there could be other restrictions in the form of higher down-payments for second and third-time buyers.

~~~~ "There could also be a policy introduced to sell your HDB flat before you purchase a private condominium," added Ong. Shabnam Muzammil, Senior Journalist at PropertyGuru, wrote this story. To contact her about this or other stories email shabnam@allproperty.com.sg


Related Stories:
Home prices could drop 5%: DBS
Jan 7, 2013
As the market moves closer to the peak of incoming supply, private home prices in Singapore could decline by up to five percent while demand remains robust at around 20,000 units, said DBS Group Research.

Alexandra gaining ground as property hotspot
Jan 7, 2013
According to Steven Tan, Managing Director of OrangeTee, the area has evolved in recent years. While housing used to be limited to HDB flats, more private properties have mushroomed within the area, including Alexis (pictured), Metropolitan and the newly-launched Echelon.
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Re: Singapore Government Announced Property Cooling Measures

Postby ngtfook » Fri Jan 11, 2013 7:33 pm

Govt just announced new cooling measure. I think this round, the impact will be significant. 8)
This is another very good opportunity for govt to collect more tax.... :evil:

http://www.channelnewsasia.com/annex/Jo ... 20Jan%2013).pdf

SINGAPORE: The Singapore government on Friday announced a comprehensive package of measures to cool the residential property market.

The measures, which will take effect on January 12, include higher buyer's stamp duty, tighter loan-to-value limits, higher minimum cash downpayment for second and subsequent housing loans, as well as an introduction of seller's stamp duty for industrial properties.

The measures are calibrated to be tighter on property ownership for investment, as well as on foreign buyers, the Ministry of National Development said.

To discourage over-borrowing, financing conditions for housing have also been tightened.

In addition, structural measures have been implemented to strengthen the policy intent of public housing and executive condominiums.

The ministry said the additional buyer's stamp duty (ABSD) will be increased between 5 and 7 percentage points across the board.

The ABSD will now be extended to permanent residents buying their first residential property and on Singaporeans buying their second residential property.

Potential buyers who already have at least one existing loan will also have to pay more cash upfront for their purchases and face tighter loan-to-value limits.

To further moderate the demand for HDB flats, the government has introduced several new measures.

It will tighten eligibility for loans to buy HDB flats.

Permanent residents who own a HDB flat will also not be allowed to sublet their entire flat.

Permanent residents who own a HDB flat must sell their flat within six months of purchasing a private residential property in Singapore.

There are also new measures to ensure that executive condominiums (EC) remain affordable for middle-income Singaporean families.

The maximum strata floor area of new EC units will be capped at 160 square metres.

Sales of new dual-key EC units will be restricted to multi-generational families only.

Developers of future EC sale sites from the Government Land Sales programme will only be allowed to launch units for sale 15 months from the date of award of the sites or after the physical completion of foundation works, whichever is earlier.

Private enclosed spaces and private roof terraces will be treated as gross floor area (GFA). The GFA of such spaces in non-landed residential developments, including ECs, will be counted as part of the "bonus" GFA of a residential development and subject to payment of charges.

For the first time, the government has also introduced a seller's stamp duty (SSD) on industrial property to discourage short-term speculative activity which could distort prices and raise costs for businesses.

It will apply to industrial properties and land bought and sold within three years of purchase.

A rate of 15 percent will be imposed on industrial properties sold within the first year of purchase. This will go down to 10 percent for those sold in the second year of purchase, and to 5 percent for those sold in the third year of purchase.

Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam said in a statement: "The reality we face is that interest rates are extraordinarily low, globally and in Singapore, and continue to add fuel to our property market.

"We have to take this further round of measures now, to check recent market trends and avoid a more serious correction in prices further down the road."

candy_chia wrote:New cooling measures possibly looming: experts
Jan 8, 2013

By Shabnam Muzammil: Recent comments by National Development Minister Khaw Boon Wan on the issue of expensive executive condominiums (ECs) could be a sign that the government is looking to implement another round of property cooling measures.

At a DTZ seminar held earlier today, the consultancy revealed that demand for ECs is at an all-time high due to potential gains and the narrowing price gap between ECs and mass market condos.

Lee Lay Keng, Associate Director, Research at DTZ noted that there is a large pool of EC buyers and the pipeline of ECs was close to its peak (7,000 units) in the middle of last year. "It hit one of its highest levels in Q2, and despite six rounds of cooling measures, demand still remains strong."

Lee noted that Mr Khaw's statement might be indicative of potential curbs.

~~ "Something to look out for would be the government's implementation of making EC open spaces chargeable to developers," she said.

~~~ Ong Choon Fah, Head of Consulting and Research, also speculated that there could be other restrictions in the form of higher down-payments for second and third-time buyers.

~~~~ "There could also be a policy introduced to sell your HDB flat before you purchase a private condominium," added Ong. Shabnam Muzammil, Senior Journalist at PropertyGuru, wrote this story. To contact her about this or other stories email shabnam@allproperty.com.sg


Related Stories:
Home prices could drop 5%: DBS
Jan 7, 2013
As the market moves closer to the peak of incoming supply, private home prices in Singapore could decline by up to five percent while demand remains robust at around 20,000 units, said DBS Group Research.

Alexandra gaining ground as property hotspot
Jan 7, 2013
According to Steven Tan, Managing Director of OrangeTee, the area has evolved in recent years. While housing used to be limited to HDB flats, more private properties have mushroomed within the area, including Alexis (pictured), Metropolitan and the newly-launched Echelon.
Price is what you pay; Value is what you get
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Re: Singapore Government Announced Property Cooling Measures

Postby djwongdj » Fri Jan 11, 2013 9:52 pm

More property cooling measures announced
11 January 2013 1848 hrs

SINGAPORE: The Singapore government on Friday announced additional measures to cool the residential property market.

The measures, which will take effect on January 12, include higher buyer's stamp duty, tighter loan-to-value limits, higher minimum cash downpayment for second and subsequent housing loans, as well as an introduction of seller's stamp duty for industrial properties.

The measures tighten property ownership for investment, as well as on foreign buyers, the government said.

To discourage over-borrowing, financing conditions for housing have also been tightened.

In addition, structural measures have been implemented to strengthen the policy intent of public housing and executive condominiums.

The government said the additional buyer's stamp duty (ABSD) will be increased between 5 and 7 percentage points across the board.

The ABSD will now be extended to permanent residents buying their first residential property and on Singaporeans buying their second residential property.

Potential buyers who already have at least one existing loan will also have to pay more cash upfront for their purchases and face tighter loan-to-value limits.

The minimum cash downpayment for individuals applying for a second or subsequent housing loan will be raised from 10 percent to 25 percent.

The government said the new ABSDs and loan rules are temporary and will be reviewed in future, depending on market conditions.

To further moderate the demand for HDB flats, the government has also introduced several new measures.

It will tighten eligibility for loans to buy HDB flats. The Mortgage Servicing Ratio (MSR) for housing loans granted by financial institutions will be capped at 30 percent of a borrower's gross monthly income.

For loans granted by HDB, the MSR cap will be lowered from 40 percent to 35 percent.

Permanent residents (PRs) who own a HDB flat will also not be allowed to sublet their entire flat.

PRs who own a HDB flat must sell their flat within six months of purchasing a private residential property in Singapore.

There are also new measures to ensure that executive condominiums (EC) remain affordable for middle-income Singaporean families.

The maximum strata floor area of new EC units will be capped at 160 square metres.

Sales of new dual-key EC units will be restricted to multi-generational families only.

Developers of future EC sale sites from the Government Land Sales programme will only be allowed to launch units for sale 15 months from the date of award of the sites or after the physical completion of foundation works, whichever is earlier.

Private enclosed spaces and private roof terraces will be treated as gross floor area (GFA). The GFA of such spaces in non-landed residential developments, including ECs, will be counted as part of the "bonus" GFA of a residential development and subject to payment of charges.

For the first time, the government has also introduced a seller's stamp duty (SSD) on industrial property to discourage short-term speculative activity which could distort prices and raise costs for businesses.

The SSD will apply to industrial properties and land bought and sold within three years of purchase.

A rate of 15 percent will be imposed on industrial properties sold within the first year of purchase. This will go down to 10 percent for those sold in the second year of purchase, and to 5 percent for those sold in the third year of purchase.

Joint Press Release on Property Cooling Measures - http://www.channelnewsasia.com/annex/Jo ... 20Jan%2013).pdf
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Re: Singapore Government Announced Property Cooling Measures

Postby candy_chia » Sat Jan 12, 2013 8:38 am

Personally, I feel this is the best measure that requires owner occupation by PR buyers as had some PR friends who reap profit by subletting their entire flats after fulfilling the miniimum occupation period. They use the rental from HDB flats to "subsidise" their mortgage payment for their private properties. :shock:

Rental yield for their HDB flats are at least 19% (based on monthly rental of $2,500) as their purchase purchase for HDB 3-room flats are in the range of $160k or less.

Purchasing a HDB flat is like bidding in an auction & second viewing is almost non-existent, especially for 3-room flats since units are snapped up within a day from personal "shopping" experience.


Measures Specific to Public Housing

The Government is also introducing measures to further moderate the demand for HDB flats, instil greater financial prudence among buyers, and require owner occupation by PR buyers.

The following measures will take effect on 12 January 2013:

a) Tighter eligibility for loans to buy HDB flats:

i) MAS will cap the Mortgage Servicing Ratio (MSR) for housing loans granted by financial institutions at 30% of a borrower’s gross monthly income.

ii) For loans granted by HDB, the cap on the MSR will be lowered from 40% to 35%.

b) PRs who own a HDB flat will be disallowed from subletting their whole flat.

c) PRs who own a HDB flat must sell their flat within six months of purchasing a private residential property in Singapore.

An additional measure will take effect on 1 July 2013 to tighten the terms for granting HDB loans and the use of CPF funds for the purchase of HDB flats with remaining leases of less than 60 years.

http://www.propertyguru.com.sg/property ... ter-market
Last edited by candy_chia on Sun Jan 13, 2013 4:31 pm, edited 2 times in total.
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Re: Singapore Government Announced Property Cooling Measures

Postby candy_chia » Sun Jan 13, 2013 9:15 am

When the heart takes control of the mind, then wealth will likely suffer.

Scramble to beat the clock
The Straits Times, Jan 12, 2013

BUYERS rushed to showflats that either opened early or kept running late into the night to allow people to beat the deadline for new cooling measures that kicked in at midnight.

The hottest ticket in town seemed to be the showflat of La Fiesta, a development that was not due to launch until Tuesday.

Hundreds of potential buyers - and jostling agents - flocked to the flat in Sengkang last night, queuing to get inside to beat the midnight deadline.

Sales manager Julia Lee was spotted outside the showflat discussing her options with her husband, while her agent was queuing for them to get in.

The couple are looking at buying a second property for investment.

There were also many agents on the phone talking about potential price appreciation, appearing to convince more clients to come down while groups of people stood around outside, apparently trying to make a decision..

Other developers, including Far East Organization and MCC Land, kept their showflats open till late while agents tried to convince prospective buyers to close deals
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Re: Singapore Government Announced Property Cooling Measures

Postby candy_chia » Sun Jan 13, 2013 4:44 pm

These stringent measures on PR on the need for owner-occupation & restriction on treating the HDB flat as cash cow, may prompt some to convert to Singaporeans, which could be what the government is trying to achieve. :idea:


"Tsunami" of property cooling measures, say analysts
By Yvonne Chan , 11 January 2013 2250 hrs, CNA

SINGAPORE: Property analysts have described the latest set of government measures as the "tsunami" of property cooling measures, as it affects public and private housing, executive condominiums, and industrial properties.

Some say, the additional stamp duty will hit investors wanting to own a second or subsequent property.

Mr Mohamed Ismail, CEO of PropNex, said: "Such a drastic move will have a downward spiral effect, loss of confidence in the market... will the current property prices go under such that people who bought in recent times... will their property be a negative asset moving forward?

"More pertinent, as far as public housing here, is the restrictions on PR (Permanent Resident).

I think there has been a lot of concerns and people have raised about PR being able to benefit while holding on to public housing and investing.

These measures will increase the supply of public housing, and overall, this will help the public housing to be further moderated."


Meanwhile, some analysts say the new measures on industrial properties did not come as a surprise.

Mr Donald Han, Managing Director of HSR Property Consultants, said: "The measures are quite timely and could have come earlier because if you notice, industrial prices have actually increased by about average 25 per cent per annum since 2010, and if you look at last year, the full year price estimate capital values have increased by more than 30 per cent.

"So all in, all the government could have actually reacted earlier on, perhaps 12 months early rather than now. But it's never too late. I think that will have a huge impact on the pace of price movement, moving forward. I expect industrial price movement this year to be a bit more moderated to a single-digit increase, if any."

Meanwhile, the Real Estate Developers' Association of Singapore (REDAS) said it will evaluate the impact of these measures on the sustainability of the property market.

REDAS added that it is in the interest of the market to have a gradual trend in growth and value for home owners and investors in the long term.

REDAS said it remains confident that Singapore's property market will continue to be underpinned by sound economic fundamentals and a favourable business environment.
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Re: Singapore Government Announced Property Cooling Measures

Postby candy_chia » Sun Jan 13, 2013 10:49 pm

Analysts differ on whether prices will fall
he Straits Times, Jan 13, 2013

Private property prices could fall as much as 5 per cent by June, a property consultant said yesterday, though other analysts were less negative.

The Government announced its seventh and most comprehensive round of cooling measures so far on Friday evening.

These will not affect Singaporeans buying their first homes but investors will feel the pinch.

"The hefty ABSD... will have a drastic impact," said PropNex chief executive Mohamed Ismail yesterday.

Additional buyer's stamp duty (ABSD) - first introduced in December 2011 - was raised by 5 to 7 percentage points across the board.

Mr Ismail expects sales volume to drop by more than half, and private property prices to slide 5 per cent within the next six months. Apart from the new measures, a bumper crop of residential supply coming onto the market could also drive down home prices.

Minister for National Development Khaw Boon Wan said on Friday that as many as 200,000 residential units are under construction. Half of those are HDB flats and the rest are private condos. They are expected to be completed within the next two to four years.

"For the moment, there is a temporary shortage and that's why some buyers panic," Mr Khaw said.

He added: "My assurance to Singaporeans: Please don't worry. We have enough homes... There will be enough homes for everybody even though the population is increasing somewhat."

~~ DWG analyst Lee Sze Teck expected price rises to be minimal: "As with all policy changes, there will be an initial knee-jerk reaction as investors reassess their options. Transaction volume in 2013 is likely to be lower than last year and price growth is likely to be flat."

~~~ A Goldman Sachs report said that home sale volumes could fall 30 per cent quarter on quarter although the bank expects price levels could still be supported as interest rates are still low.

~~~~ Savills research head Alan Cheong had the most bullish outlook on property prices, even expecting them to rise this year as developers have paid high prices for recent land tenders. He thinks high-end condo prices could still rise between 3 per cent and 5 per cent, and mass market condo prices could shoot up as much as 15 per cent.

"People still wanted to sign contracts at the eleventh hour on Friday. :shock:

If they thought prices would drop more than 7 per cent, why rush to sign? They would instead have forfeited their options,"
Mr Cheong said.
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Re: Singapore Government Announced Property Cooling Measures

Postby candy_chia » Sat Jan 19, 2013 3:36 pm

Averting a property bubble
Published on Jan 19, 2013, The Straits Times

THE latest measures to cool the property market, unveiled by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam, underline the seriousness of the Government's intention to prevent a property bubble from forming.

The economic rationale for the move is clear: Asset inflation can have a devastating impact if it runs ahead of economic fundamentals.
===> Not only will this distort the real economy
===> but it also poses a grave threat down the road - an inevitable correction will be destabilising and painful.


~ When the Japanese asset price bubble of the mid-1980s was pricked, it led to a Lost Decade.

~~~ The bursting of the real estate bubble in Thailand, to which large capital inflows had contributed, compounded its vulnerability during the Asian economic crisis of the late 1990s. T

~~~~ The price of irresponsible economic behaviour, in both the housing and credit markets, was seen in the sub-prime mortgage crisis in the United States just a few years ago. Triggered by the collapse of the housing bubble, it precipitated a national crisis of defaults and foreclosures.


Singapore must avoid such boom-and-bust cycles. Property prices are an expression of confidence in the economy but that logic is turned on its head by the ever-present temptations of over-borrowing and speculative buying. Whether as a hedge against inflation or for other reasons, the runaway mood seen lately calls for caution.

Mr Shanmugaratnam has acted pre-emptively in the face of very low interest rates, both globally and in Singapore, that were also contributing to demand. Such borrowing could become precarious in a prolonged economic downturn. Consumers who were snapping up offers even at the last minute, before the curbs took effect, could be hit hard later trying to service large loans for a second or third property.

While regulations should be broad-based in an over-heating property market, it is right and proper to support first-time buyers and citizens. Profit-seeking investors, whether local or foreign, should be discouraged, of course. As with health-care subsidies, property-market policies are often calibrated in favour of citizens in many places. Hence, the latest moves should not be seen by permanent residents as eroding the value Singapore places on attracting skilled people here to help strengthen its standing as a vibrant global city.

It is important to resist calls to make the market-cooling measures permanent. Some see this as the panacea for volatility, but its cost could be a crashing market that would hurt home buyers along with speculators. It is better to give regulators leeway to do periodic reviews and intervene strategically.
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Re: Singapore Government Announced Property Cooling Measures

Postby Darren Lee » Tue Feb 05, 2013 1:47 am

I'm just excited to hear abt this new cooling measure (for someone who hasn't gotten their 1st property yet).
Investors should really seek elsewhere for growth. I think its a matter of time that commercial & iskandar property will experience the hot money. :lol:
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Re: Singapore Government Announced Property Cooling Measures

Postby ui21cn » Tue Feb 05, 2013 9:05 am

Darren Lee wrote:I'm just excited to hear abt this new cooling measure (for someone who hasn't gotten their 1st property yet).
Investors should really seek elsewhere for growth. I think its a matter of time that commercial & iskandar property will experience the hot money. :lol:


I am responding base on some of my observation within the industry:-
The Singapore Commercial Property started to run wild starting a year ago (or even earlier) - especially the shop houses and shop lots within a mix development
At Iskandar Side - some have gone double compare to the very initial phase :!:

Hot Money don't wait for the "cooling measure" to react - it has taken the action way ahead.

For those who wanted to explore, need to ask yourself what is the "risk tolerant" you can accept.

Rgds,
Wei Teck
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Re: Singapore Government Announced Property Cooling Measures

Postby Darren Lee » Sat Mar 09, 2013 2:23 am

ui21cn wrote:
Darren Lee wrote:I'm just excited to hear abt this new cooling measure (for someone who hasn't gotten their 1st property yet).
Investors should really seek elsewhere for growth. I think its a matter of time that commercial & iskandar property will experience the hot money. :lol:


I am responding base on some of my observation within the industry:-
The Singapore Commercial Property started to run wild starting a year ago (or even earlier) - especially the shop houses and shop lots within a mix development
At Iskandar Side - some have gone double compare to the very initial phase :!:

Hot Money don't wait for the "cooling measure" to react - it has taken the action way ahead.

For those who wanted to explore, need to ask yourself what is the "risk tolerant" you can accept.

Rgds,
Wei Teck


Yes! WeiTeck,

Just visited Iskandar, omg. Its true that prices have risen.

Darren
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Re: Singapore Government Announced Property Cooling Measures

Postby candy_chia » Fri Jun 28, 2013 10:05 pm

MAS introduces new debt servicing framework for property loans
Friday, Jun 28, 2013

SINGAPORE - The Monetary Authority of Singapore (MAS) announced on Friday a new Total Debt Servicing Ratio (TDSR) framework for all property loans granted by financial institutions (FIs) to individuals.

Image

This will require FIs to take into consideration borrowers' other outstanding debt obligations when granting property loans, and is aimed at helping to strengthen credit underwriting practices and encourage financial prudence among borrowers.

MAS also said it will refine rules related to the application of the existing Loan-to-Value (LTV) limits on housing loans.

These refinements will seek to ensure the effectiveness of the LTV limits that were put in place to cool investment demand in the housing market, the authority said.

In particular, they aim to prevent circumvention of the tighter LTV limits on second and subsequent housing loans.

Introduction of TDSR framework

In a thematic inspection of banks' residential property loan portfolios in 2012, banks were found to have uneven practices with respect to the application of debt servicing ratios despite having sound policies for assessing borrowers.

The TDSR framework will allow FIs to assess the debt servicing ability of borrowers by taking into consideration their other outstanding debt obligations. FIs will be required to compute the TDSR, or the percentage of total monthly debt obligations to gross monthly income, on a consistent basis.

The coverage of the TDSR framework will be more comprehensive than FIs' current practice. The TDSR will apply to loans for the purchase of all types of property, loans secured on property, and the re-financing of all such loans.

The methodology for computing the TDSR will be standardised. FIs will be required to:

-take into account the Monthly Repayment for the Property Loan that the borrower is Applying for Plus the monthly repayments on all other Outstanding Property and NON-Property Debt obligations of the borrower;

Image

-apply a specified medium-term interest rate or the prevailing market interest rate, whichever is higher, to the property loan that the borrower is applying for when calculating the TDSR;

-apply a haircut of at least 30% to all variable income (e.g. bonuses) and rental income; and

-apply haircuts to and amortise the value of any eligible financial assets taken into consideration in assessing the borrower's debt servicing ability, in order to convert them into 'income streams' in computing the TDSR.

FIs will be required to verify and obtain relevant documentation on a borrower's debt obligations and income used in the computation of the TDSR.

MAS expects any property loan extended by the FI to NOT exceed a TDSR threshold of 60%

Image

and will regard any property loan in excess of a 60% TDSR to be imprudent.


The threshold is set at 60% for a start to allow both the FIs and borrowers to familiarise themselves with the TDSR framework and its computation methodology.

MAS will monitor and review the 60% threshold over time, with a view to further encouraging financial prudence.

Refinement of rules related to application of LTV limits

MAS will refine certain rules related to the application of the existing LTV limits on housing loans granted by FIs. In particular, MAS will require:

-borrowers named on a property loan to be the mortgagors of the residential property for which the loan is taken;

-"guarantors" who are standing guarantee for borrowers otherwise assessed by the FI at the point of application for the housing loan not to meet the TDSR threshold for a property loan to be brought in as co-borrowers;

-and in the case of joint borrowers, that FIs use the income-weighted average age of borrowers7 when applying the rules on loan tenure.8

Measures for the long term

The new rules will take effect from 29 June 2013.

The TDSR framework and refinements to the rules relating to the application of LTV limits are structural in nature, and will be in place for the long term. They aim to encourage prudent borrowing by households and strengthen credit underwriting standards by FIs.

They do not involve changes to the LTV limits on housing loans themselves, which were last tightened in January 2013 as part of the government's package of measures to promote stable and sustainable conditions in the housing market.9 The current LTV limits are not permanent, and will be reviewed depending on the state of the property market.

http://business.asiaone.com/news/mas-in ... Vhp7N.dpuf

http://www.mas.gov.sg/News-and-Publicat ... Loans.aspx



Note:
Total Debt Service Ratio (TDSR)

A debt service is a measurement of a Household's Debt Load.

TDSR determines whether or not the household is close to Unable to Make Monthly Payments on debts.

Image

More specifically, this ratio shows the proportion of gross income that is already spent on housing-related and other similar payments.

Receiving a ratio of less than 40% means that the potential borrower has an Acceptable level of Debt.

TDSR
= Monthly Mortgage Payments
+ Other Debt Monthly Payments
-------------------------------------
Gross Monthly Family Income




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candy_chia
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Re: Singapore Government Announced Property Cooling Measures

Postby ngtfook » Mon Jul 29, 2013 8:34 pm

Analyst: 9,000 troubled units could be on market
Jul 24, 2013 - PropertyGuru.com.sg

Up to 9,000 Singapore private property owners could be forced to sell their homes if interest rates rise in the city-state, according to an analyst report published today.

On the back of news that up to 10 percent of Singapore households may have already over-leveraged their private property purchases beyond the new 60 percent limit that was recently imposed by the Monetary Authority of Singapore (MAS), wealth management firm Religare Enterprises has cautioned its clients to avoid investing in Singapore property developers.

In its ASEAN Property Pulse report released today, the research arm of the India-based firm explained that between 10 -15 percent of borrowers could be in financial trouble should interest rates rise in Singapore.

MAS has reported that between five to 10 percent of Singapore households could have over-extended themselves, fuelled by low interest rates and stretched loan tenures. The majority of mortgage loans in Singapore are floating rate packages, according to the company, which means households will face higher monthly repayments when interest rates normalise.

Religare has predicted that a rise in interest rates could see more than 9,000 financially troubled properties being listed on the market – assuming a figure of 10 percent of the 90,000 private homes that are scheduled to be completed between now and 2016.

The authors of the report said: “Another worrying statistic is that only 70 percent of the loans are for owner-occupied homes, meaning investor demand in private homes is running quite high.”

Housing Development Board (HDB) properties and executive condominiums (ECs) have to be purchased for self-occupation, the company noted, so all property investment demand is in the private property sector.

“A little wobble in prices combined with higher interest rates might shake up a few property investors as well and add to the possible troubled units on the market,” the report said.

The company has advised its clients to be cautious on the Singapore residential property market and against investing in Singapore property developer shares.

We expect prices and rents to correct over 2014-15 on the back of completion of more than 90,000 units between 2H 2013 and 2016,” it predicted.
Price is what you pay; Value is what you get
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