Friday, October 5, 2012

End of the road for them 50-year housing loan...


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 maximum tenure of all new residential property loans will be capped at 35 years.

In addition, loans exceeding 30 years' tenure will face significantly tighter loan-to-value (LTV) limits.  (* We understand from tonight's news report that the new ratio will be 60% for first property and 40% for all subsequent proporties *)

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% 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% in the third quarter from the April-June quarter, when prices increased by 0.4%, while HDB resale prices gained 2.0% quarter-on-quarter following an increase of 1.3% in April-June.
Source: Channel News Asia



14 comments:

Anonymous said...

Methinks the cooling measure is a non-event. Cos buyer themselves already impose the 30/35 years tenure upon themselves.

In addition, current buyers already know they have to hold a property for four years (to avoid the additional tax) and should have the resources to tide over the next four uncertain years, as such the LTV may also be a non-event?

Subrat said...

I believe capping the home loan tenor to 35 years would not have much impact to genuine buyers as they would normally take into account the retirement age and the liability factors.

However, capping the LTV to 60% for first property would make the property out of reach for most of the young buyers (couples, singles) since with the current market lending rates most of the young couples would opt for 30-35 year tenor for private property with LTV 80%. In case of HDB, forking out 40% down payment would be a real challenge

Subrat

Anonymous said...

How to increase population when young couples hv no roof ?

If tenants do not hv money to buy, rental yields will be supported. Gini co efficient will be higher perhaps?

Anonymous said...

Si liao. Price come down liao

Mooncake said...

Actually, I think property price will never not go down significantly in Singapore. It may drop 2 to 5 percent here & there but ....
Singapore government will not allow it to drop drastically as they are the ones who encourage home ownership in this tiny red dot.
Furthermore, we are a population of 5 millions plus going to 6 million as mentioned by LHL during his National Day TV show. What the government is doing is to curb speculative appetite. Greed kills faster than Speed, that is why I speed (within speed limits), but I don't greed!

But I do predict that prices will not increase lightening fast like the speed we saw from 2005 to 2009. But property prices will NEVER go down significantly in land-scarce Singapore. Ask around - Gambia & Kovan Residence are 100% sell out and these are in non-prime districts.

Also because this new rule has little effect on folks who are genuine buyers. These buyers already limit themselves to 30 yrs loan anyway, with or without this rule.
We Singaporeans are too smart to take up a loan exceeding 30 years as that means paying MORE interests to the banks over LONGER periods.

So I welcome this move very much as it only hurts bad banks who offered long loan tenure to misled buyers (especially the young ones) that you are paying very little every month. What they don't tell is that you are paying mostly interests in the early stages of the loan! Sow wicked!

Now that the banks are checked, I hope the government will do something to developers who are the greedy ones & they are the ones pushing up the PSF at every new launch. So evil!

To allow Free Market forces at play is important as Economists says but it must be within reasonable controls & monitoring by the invisible hand.

eg: No more shoebox units below 500 sqft selling at S$2,000 PSF! Capped PSF for shoebox units to the average PSF of condos within 1 km radius
eg: Balloting at new launch for only buyers with more than 1 property. That way folks who need a roof can have one.
eg: Better quality controls so that actual units when collecting keys are much closer to the showflat units seen at purchased time. Control the amount of Interior Design Gimmicks!
eg: PSF range must be provided by government property analysts so that the PSF range set by developers are within the area's other PSF. This is to prevent another Sky Habitat PSF hitting the roof!
eg: apply the 2 km radius discounts that HDB has to Condo buyers. If children stay in HDB & parents in condo within 2km, make condo developers offer 5% discount or something!

Well, I can only think of these.... I need my morning coffee to think some more. But I am sure many of you have better ideas than my stupid ones.
So speak up, for we know this website is now read by those people in SPH. Give them some ideas! Yo Ho Ho ..... Hello, SPH!





Anonymous said...

did u play in 1996? u know what happened?

Anonymous said...

SG has a unique position. When developers buy land sales from Them , do they or do not Know and hv full set of rules laid out before them? Cos the Big one can change and turn and twist rules during the course of the game. It's BUY at your own peril. Is this fair?

The Folks @PropTalk said...

Hi Anonymous (9/10/12, 1:00PM):

Fair? What's that??

It's either you play by whatever rules that are laid down (even if the goal-post gets shifted every once in awhile) or you stop playing.

Some may suggest changing the referees altogether but if we do that, our security may be at risk and our women will become ball-pickers in other countries... at least that's what we've been told anyway.

And before we get into any sort of trouble, the wife and I are not talking politics here... just soccer. :)

Anonymous said...

And when they cannot unload their curry puffs,goreng pisang, apok apok or whatever they are selling within so many hours of completion of baking , Big Bro come around and hantam them some more?

The Folks @PropTalk said...

Hi Anonymous (9/10/12, 2:33PM):

It's not so much the sellers that the wife and I are worried about. It's the folks who may end up suffering from severe diarrohea after buying/eating those expensive curry puff, goreng pisang, apok apok etc that we are particularly concerned with.

Anonymous said...

Mkt will be hit. U

nlike ABSD, ABSD targetted foreigners and a select group of poeple buying third property and PR buying 2nd property.

This round, ALL will be hit (foreigners and locals and corporations alike) except The Young Ones

Mooncake said...

Actually, if one has no current loan mortgage & is less than 65 years old & takes up a loan that is 30 years or less, one can still get 80% loan to value.
Rule applies only if one is still servicing a loan, then one can only get up to 60% LTV for 2nd property purchased; & 40% LTV if one exceeds 65 years old or loan tenure exceeds 30 years.

What I think could really help is that MAS allows "bridging time" as people buy & sell their only residential home. That means eg: if I now own a 2 BR condo; still servicing the loan. I want to upgrade to a 3 BR condo. MAS should allow me to buy 3 BR condo with 80% LTV, provided I sell my current 2 BR condo within 3 months.
That way, this rule does not hurt the already reducing birth rate in Singapore. Just my 2 cents.



The Folks @PropTalk said...



Anonymous (10/10/12, 1:50PM):

Even the young ones will be hit if you think about it.

While the wife and I typically advise against a longer loan tenure (given the much larger loan interest amount you may end up paying), the difference in monthly repayment between a 30 vs 35-year loan can be quite substantial. And for young couples with generally limited financial means (unless they have rich parents to depend upon), this will reduce their options on what they can reasonably afford.


Mooncake:

We don't know if this is what you meant but assuming one is 45yo and decides to take up a 25-year loan for a second property, he/she will still be subjected to the new LTV loan ratio of 40%.

This is because the loan tenure will stretch beyond the current retirement age of 65.

But the wife and I like your suggestion of a "bridging time". This is actually what some banks used to do when considering borderline cases whereby the total loan exposure for 2 properties is more than what they can typically lend. So the bank will grant you the loan on the 2nd property if you sign an undertaking that you will sell your 1st property within a stipulated time (think it's 6 months if our memories serve us right).

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