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The Straits Times
www.straitstimes.com
Published on Oct 06, 2012
Latest cooling measures: How are property buyers affected?
Mortgage limits may deter older investors
Monthly instalments for shorter loans could be higher than rentals
By Daryl Chin
THE latest changes to mortgage rules could deter many house-hunters from buying a new property - or at least give them serious pause, analysts and property market watchers said yesterday.
Chief among this group will be older investors looking to buy a second or third investment property, they noted.
And HDB upgraders who want to get on the private property ladder will also not be spared.
From today, the Monetary Authority of Singapore (MAS) will cap all new housing loans at a maximum allowable tenure of 35 years.
Tighter rules will also apply to borrowers taking loans longer than 30 years, or have their loan periods extend beyond the retirement age of 65.
If they have no outstanding mortgage, the cash down payment is now 40 per cent of the property's valuation instead of the usual 20 per cent.
If they already have an existing mortgage and want to take another one for another property, the cash down payment is 60 per cent, instead of the current 40 per cent.
For these borrowers, the only way to avoid paying the additional 20 per cent cash down payment is to opt for shorter loan tenures that do not extend past the age of 65.
But this will mean higher monthly instalments.
PropNex chief executive Mohamed Ismail said that the new rules will hit those who buy investment properties the hardest.
"Investors want to leverage, meaning to put down a smaller financial outlay and get a bigger loan," he explained.
"Essentially, this will force these investors to limit their loans to 30 years or less if they don't want to have their loans expire past 65.
"As a rough estimate, cutting down the loan tenure by five years could mean increasing your monthly loan quantum by some 15 per cent."
Dennis Wee Group spokesman Lee Sze Teck said this will make buyers think carefully before signing on the dotted line.
If loan tenures are capped, monthly instalments could well end up higher than monthly rentals that an investment property can fetch.
"Renters will also rethink buying," he said.
And if investors want to take a longer loan to keep instalments low, they will need to come up with 60 per cent cash, he added.
"Think of it this way: you'll be unaffected only if you are young and buying an affordable mass market condo or a flat direct from HDB," said Mr Lee.
Head of research at property consultancy SLP International Nicholas Mak agreed, saying: "This will affect buyers for all types of property, particularly older borderline investors who are already financially stretched and are on the cusp of investing more.
"The immediate effect is house-hunters are going to take a step back to see if asking prices soften. This might also result in a drop in transactions for the third quarter," he predicted.
Most investors and HDB upgraders The Straits Times spoke to yesterday expressed dismay at the latest tweaks.
Senior manager Dylan Koh, 55, who currently lives in a condo at Mount Sinai, said he had almost bought another one in the same development a week ago.
"But now the chance has passed me by. If I want to get the same unit today, I'll have to pay so much more since my loan tenure will take me past the age of retirement," he said.
Mrs Loh Siew Mee, a 51-year- old full-time investor, said: "I was just biding my time till prices go slightly lower before I jump in. I'm regretting that decision now."
Her landed home in Upper Bukit Timah is fully paid up, but she is servicing two loans for two condominiums in the west. "Now, I can only wait until resale prices come down before I make a considered decision again," she added.
Mr Rupert Goh, who lives in a four-room flat in Ang Mo Kio, is also in a fix.
The 48-year-old IT manager said he would have to rethink his plans to buy an investment property. "It would be impossible for me to come up with so much cash if I want to take a 35-year loan."
darylc@sph.com.g
www.straitstimes.com
Published on Oct 06, 2012
Latest cooling measures: How are property buyers affected?
Mortgage limits may deter older investors
Monthly instalments for shorter loans could be higher than rentals
By Daryl Chin
THE latest changes to mortgage rules could deter many house-hunters from buying a new property - or at least give them serious pause, analysts and property market watchers said yesterday.
Chief among this group will be older investors looking to buy a second or third investment property, they noted.
And HDB upgraders who want to get on the private property ladder will also not be spared.
From today, the Monetary Authority of Singapore (MAS) will cap all new housing loans at a maximum allowable tenure of 35 years.
Tighter rules will also apply to borrowers taking loans longer than 30 years, or have their loan periods extend beyond the retirement age of 65.
If they have no outstanding mortgage, the cash down payment is now 40 per cent of the property's valuation instead of the usual 20 per cent.
If they already have an existing mortgage and want to take another one for another property, the cash down payment is 60 per cent, instead of the current 40 per cent.
For these borrowers, the only way to avoid paying the additional 20 per cent cash down payment is to opt for shorter loan tenures that do not extend past the age of 65.
But this will mean higher monthly instalments.
PropNex chief executive Mohamed Ismail said that the new rules will hit those who buy investment properties the hardest.
"Investors want to leverage, meaning to put down a smaller financial outlay and get a bigger loan," he explained.
"Essentially, this will force these investors to limit their loans to 30 years or less if they don't want to have their loans expire past 65.
"As a rough estimate, cutting down the loan tenure by five years could mean increasing your monthly loan quantum by some 15 per cent."
Dennis Wee Group spokesman Lee Sze Teck said this will make buyers think carefully before signing on the dotted line.
If loan tenures are capped, monthly instalments could well end up higher than monthly rentals that an investment property can fetch.
"Renters will also rethink buying," he said.
And if investors want to take a longer loan to keep instalments low, they will need to come up with 60 per cent cash, he added.
"Think of it this way: you'll be unaffected only if you are young and buying an affordable mass market condo or a flat direct from HDB," said Mr Lee.
Head of research at property consultancy SLP International Nicholas Mak agreed, saying: "This will affect buyers for all types of property, particularly older borderline investors who are already financially stretched and are on the cusp of investing more.
"The immediate effect is house-hunters are going to take a step back to see if asking prices soften. This might also result in a drop in transactions for the third quarter," he predicted.
Most investors and HDB upgraders The Straits Times spoke to yesterday expressed dismay at the latest tweaks.
Senior manager Dylan Koh, 55, who currently lives in a condo at Mount Sinai, said he had almost bought another one in the same development a week ago.
"But now the chance has passed me by. If I want to get the same unit today, I'll have to pay so much more since my loan tenure will take me past the age of retirement," he said.
Mrs Loh Siew Mee, a 51-year- old full-time investor, said: "I was just biding my time till prices go slightly lower before I jump in. I'm regretting that decision now."
Her landed home in Upper Bukit Timah is fully paid up, but she is servicing two loans for two condominiums in the west. "Now, I can only wait until resale prices come down before I make a considered decision again," she added.
Mr Rupert Goh, who lives in a four-room flat in Ang Mo Kio, is also in a fix.
The 48-year-old IT manager said he would have to rethink his plans to buy an investment property. "It would be impossible for me to come up with so much cash if I want to take a 35-year loan."
darylc@sph.com.g
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