Homepage
PR Newswire
09-10-2012, 06:58 PM
The Straits Times
www.straitstimes.com
Published on Oct 09, 2012
Home loan curbs 'will hit older buyers'
Recent changes similar in effect to higher interest rates, say analysts
By Magdalen Ng
INVESTORS in a weak financial position and buyers in their 40s and 50s will feel the effects of the latest property rules most acutely, analysts say.
The changes, unveiled by the Monetary Authority of Singapore last Friday, are similar, in effect, to higher interest rates, they said.
Some older buyers who already have a loan may abandon plans to buy an investment property, the analysts added.
The central bank set a maximum of 35 years on all home loans. For new loans, the loan-to-value ratio has been lowered if the loan exceeds 30 years, or if the loan period extends beyond the retirement age of 65.
Savills Singapore research head Alan Cheong said the "weak investor" can come from any age group. An example would be someone in his 40s earning less than his peers who wants to get ahead by entering the property market, thinking he can make money in the rental market.
"The new rules create an effect similar to rising interest rates, and increase the monthly cash outflow of home buyers," he said.
Older buyers will be forced to take shorter loans if they do not wish to pay a larger amount upfront. In some cases, the monthly rental received from these properties may not even be sufficient to cover their monthly mortgage.
R'ST Research director Ong Kah Seng said: "Most investors will rethink buying the property if the monthly repayment exceeds the monthly rental, unless there are other sources to make up for the shortfall."
Mr Png Poh Soon, head of research at Knight Frank Singapore, said the new measures would make buyers more cautious when buying properties for investment.
For instance, a 50-year-old investor will now be able to get a maximum loan term of only 15 years if he wants to avoid the stricter loan-to-valuation limits.
This means that if he buys a three-bedder at Sunville in the Serangoon area for $1.2million, his monthly repayment on a 15-year loan will be $4,367 (assuming he has another loan). Previously, assuming he met the bank's credit assessment criteria, he could have taken a 25-year loan with a monthly mortgage of only $2,773. The rent for such a unit would be about $3,800.
SLP International research head Nicholas Mak noted that the calculations "assume that interest rates remain low, which I do not expect for the next 20 years".
While the new rules are not the sole factors putting off Ms Vivian Lee from upgrading to a suburban condominium, they will affect her eventual decision.
The 39-year-old bank manager said: "We intended to take out a 30-year loan, but now I don't think so. Probably 25, which will affect our monthly cashflow."
The new rules may sway smaller and middle-aged investors towards the "very frothy" industrial and commercial property market, said International Property Advisor chief executive Ku Swee Yong. "We should now look for new curbs in the industrial and commercial sector. Some are selling at $1,000 per sq ft. It is completely insane in terms of pricing."
songyuan@sph.com.sg
www.straitstimes.com
Published on Oct 09, 2012
Home loan curbs 'will hit older buyers'
Recent changes similar in effect to higher interest rates, say analysts
By Magdalen Ng
INVESTORS in a weak financial position and buyers in their 40s and 50s will feel the effects of the latest property rules most acutely, analysts say.
The changes, unveiled by the Monetary Authority of Singapore last Friday, are similar, in effect, to higher interest rates, they said.
Some older buyers who already have a loan may abandon plans to buy an investment property, the analysts added.
The central bank set a maximum of 35 years on all home loans. For new loans, the loan-to-value ratio has been lowered if the loan exceeds 30 years, or if the loan period extends beyond the retirement age of 65.
Savills Singapore research head Alan Cheong said the "weak investor" can come from any age group. An example would be someone in his 40s earning less than his peers who wants to get ahead by entering the property market, thinking he can make money in the rental market.
"The new rules create an effect similar to rising interest rates, and increase the monthly cash outflow of home buyers," he said.
Older buyers will be forced to take shorter loans if they do not wish to pay a larger amount upfront. In some cases, the monthly rental received from these properties may not even be sufficient to cover their monthly mortgage.
R'ST Research director Ong Kah Seng said: "Most investors will rethink buying the property if the monthly repayment exceeds the monthly rental, unless there are other sources to make up for the shortfall."
Mr Png Poh Soon, head of research at Knight Frank Singapore, said the new measures would make buyers more cautious when buying properties for investment.
For instance, a 50-year-old investor will now be able to get a maximum loan term of only 15 years if he wants to avoid the stricter loan-to-valuation limits.
This means that if he buys a three-bedder at Sunville in the Serangoon area for $1.2million, his monthly repayment on a 15-year loan will be $4,367 (assuming he has another loan). Previously, assuming he met the bank's credit assessment criteria, he could have taken a 25-year loan with a monthly mortgage of only $2,773. The rent for such a unit would be about $3,800.
SLP International research head Nicholas Mak noted that the calculations "assume that interest rates remain low, which I do not expect for the next 20 years".
While the new rules are not the sole factors putting off Ms Vivian Lee from upgrading to a suburban condominium, they will affect her eventual decision.
The 39-year-old bank manager said: "We intended to take out a 30-year loan, but now I don't think so. Probably 25, which will affect our monthly cashflow."
The new rules may sway smaller and middle-aged investors towards the "very frothy" industrial and commercial property market, said International Property Advisor chief executive Ku Swee Yong. "We should now look for new curbs in the industrial and commercial sector. Some are selling at $1,000 per sq ft. It is completely insane in terms of pricing."
songyuan@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/