Government imposes new curbs on property buys through debt servicing framework

[Contrarian]

If Gov is serious about curbing the property market, they do not have to come out with so many CMs and still not effective. The 9th wayang will be out in the near future. They are fully aware people enjoy watching wayangs .

Obviously, this TDSR is to close some loop holes that allowed people to bypass the previous CMs; and also getting the FIs to follow similar assessment criteria. When people work, you say people wayang; when people don't work, will you say they are sleeping? Please remember that there are many civil servants who are just ordinary citizen doing their job.

Yes they work. More work like fire fighter approach.

The collection of data to the finest level of granularity, when it did start? Banks, property developers, agents and buyers are all creative and dynamic. The rules are static.

I doubt they are proactive and uses detailed business intelligence. Definitely less than that of IRAS.

The best measure is to up interest rates early. They waited how many years to do this.

Must give them world fire brigade chief award.

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The cleanest way is to increase housing supply, other deliberate actions are cosmetics. Period.

An even cleaner method is to allow our children buy HDB NOW. A big part of the condo sales will collapse. Many are buying for the kids worrying about flat prices shooting through the roof.

[Behappyalways]

The MAS is expecting interest rates to go up significantly and fast....They are trying to minimise the negative effect when the day comes......how rising interest rates going to affect the economy, the property players, the average households, the banks, the stock market and etc.......

I think the more important modification is in the 3.5% interest on which the 60% is based. Also reading between the lines, the 60% is only a start and will be lowered gradually.
The other part of the announcement that imposes the rule where guarantors have to be co borrowers effectively closes the "buy second property under family member name" loop-hole. All in, noose appears to be tightening around those who borrow excessively.

[hyom]

Most people seems to have 2 property. Esp those in 30s and 40s.
maybe cannot refinance their existing loan. And stuck with their existing loans with Board rates (5%). Unless they top up.

Not many of my peers have 2 or more properties. Maybe it is because I am an engineer

I see this Total Debt Servicing Ratio(TDSR) as a new monetary tool by MAS to control money supply and fine-tune the credit market. Hopefully, applying this tool is not too late. But why at 60%?

Correction: Someone pointed out that the Singapore household debt to GDP should not be 279% and should be lower than 100%.

I have deleted most of what I originally wrote because it was based on faulty data. Analysis based on wrong data mislead people.

http://www.ricsasia.org/newsDetail.php?id=305

http://www.bloomberg.com/news/2013-05-03...-debt.html

http://www.stproperty.sg/articles-proper...t/a/124941

[pianist]

my humble view considering our unique situation in sg....lot of cheap monies or current asset...it could be that the sheer volume of wealth and cash available and owned by the people borrowing the bank's loans easily dwarfed the total debt..? Or many rich elderly people who are not working, helping their schooling children to buy house using the youngers' name. Isn't this brilliant loophole?
Rem that tampines ec penthouse case, businessman dad helping returning son from USA to buy house in sg. His son not working here no GDP yet and dad business' GDP could be booked else where. So cheap debt showed up but GDP not here.

[yeokiwi]

Total Singapore household debt to GDP stands at 279% in the 1st quarter of 2013 and most of it are in mortgages.

Looking at the loan side of the story is incomplete without looking at the current asset.
It may look inconceivable but the loan-to-asset ratio of Singaporeans is really good.

http://www.valuebuddies.com/thread-2535.html

Personally, I can clear my HDB loan but I still hold on to it and contribute a small little percentage to the total consumer loan.
And... there are tons of these people out there.

[opmi]

Most people seems to have 2 property. Esp those in 30s and 40s.
maybe cannot refinance their existing loan. And stuck with their existing loans with Board rates (5%). Unless they top up.

Not many of my peers have 2 or more properties. Maybe it is because I am an engineer

.......
I see this Total Debt Servicing Ratio(TDSR) as a new monetary tool by MAS to control money supply and fine-tune the credit market. Hopefully, applying this tool is not too late. But why at 60%?

Unlike equity bubbles, the bursting of property bubbles pose systemic risks to

By the way, this record high 279% household-debt-to-GDP is reached at a time when interest rates are at a ridiculous record low. When interest rates go up, baboom!!!

Because of the contagion effect due to the widespread leverage, it is not going to baboom in the property market only. Hope I am not going to lose my job again.

http://www.ricsasia.org/newsDetail.php?id=305

http://www.bloomberg.com/news/2013-05-03...-debt.html

http://www.stproperty.sg/articles-proper...t/a/124941

Yes. Those around me with 2 properties mainly civil servants especially both husband/wife teachers. And they are fresh meat never see property downcycle yet.

these new loans will impact new loans and refinancing. especially the marginal noob borrowers that really stretching with guarantors and proxies. These off balance sheets financing arrangements will be brought to light.

[hyom]

Total Singapore household debt to GDP stands at 279% in the 1st quarter of 2013 and most of it are in mortgages.

Looking at the loan side of the story is incomplete without looking at the current asset.
It may look inconceivable but the loan-to-asset ratio of Singaporeans is really good.

Hi yeokiwi,

Thanks! This loan-to-asset ratio of Singapore household is a good number to provide a strong counter-argument why the Singaporean household is not in dire trouble when the property bubble bursts.

I am not yet totally convinced. If this number is the current ratio of a company, it is good. However, total household loan-to-asset ratio consists of the debt and assets from all the households. Given today's extremely unbalanced wealthy distribution, this figure can be skewed by the ultra-rich who owes little debt and plenty of assets. Does it reflect the typical household?

A more useful number will be the percentage of Singaporean households with current ratio less than 1 to negate the skewing effect of ultra-rich households. Unfortunately, I am not sure if such a number exists. There are many people on this forum who are rich enough to skew this statistic the total loan-to-asset ratio Please get rid of their distorting influence.

There is a household sector balance sheet in another valuebuddies thread .
http://www.valuebuddies.com/thread-1954-page-2.html

A few things observed from the balance sheet;
- Up to 2003, most mortgage debt fell into the hands of HDB. After HDB "outsourced" the financing, most mortgage debt went to the banks. The social consequences will be much more serious when the property market crashes next time compared to 1997 because the debt now is mostly held by profit-driven banks who will not hesitate to foreclose.
- Proportion of shares/securities held by households do not look high and cash deposits look healthily high. This means that the stock market still has much room to grow given the amount of cash sitting on the sideline. This bodes well for the stock market and should be good news for most forummers here.

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Yes. Those around me with 2 properties mainly civil servants especially both husband/wife teachers. And they are fresh meat never see property downcycle yet.

Hi opmi,

Thanks for the information. It is not surprising to know many civil servants own 2 properties. Civil servants have a fairly iron rice bowl compared to people from the private sector. For the more senior ones, the iron rice bowl can also be gold-plated. For this group of people, it makes good financial sense to employ leverage because of their stable and strong cashflow. It is like utilities and telecom operators having poor current ratio (yet not considered financially risky) because of their strong and stable cashflow.

Those who work in sectors(say, the electronics sector with shrinking exports for the past years) which see retrenchment on a regular basis will have to steer clear of leverage. Because of their unstable cashflow, it is risky for this group of people to buy a second property even if their salary is above-average. Companies with unstable cashflow usually have a higher current ratio to protect against bad times as it strikes them more often.

[yeokiwi]

I am not yet totally convinced. If this number is the current ratio of a company, it is good. However, total household loan-to-asset ratio consists of the debt and assets from all the households. Given today's extremely unbalanced wealthy distribution, this figure can be skewed by the ultra-rich who owes little debt. Does it reflect the typical household?

A more useful number will be the percentage of Singaporean households with current ratio less than 1 to negate the skewing effect of ultra-rich households. Unfortunately, I am not sure if such a number exists. There are many people on this forum who are rich enough to skew this statistic the total loan-to-asset ratio Please get rid of their distorting influence.

There is a household sector balance sheet in another valuebuddies thread .
http://www.valuebuddies.com/thread-1954-page-2.html

This is the latest statistics.
http://www.singstat.gov.sg/publications/...ip-e41.pdf

The more revealing figure is the asset amount of CPF. Since the CPF contribution has a ceiling limit, I suppose the distribution of the CPF fund is relatively more equal among Singaporean families than other current assets.

The total CPF fund is $219million vs a total mortgage loan of $182million. If we include life insurance, that is another $113 million.

So, in times of crisis, the mere lifting of the usage of special account for mortgage payment will likely to reduce the possibility
of a financial meltdown due to mortgage loan default greatly.

Edit...
http://www.singstat.gov.sg/statistics/br...ce1q13.xls
This is the latest 1q13 household balance sheet. The figure is even better.
CPF : 237 millions.
Mortgage loan : 197 millions
Life insurance : 121 millions

[opmi]

After setting aside minimum sum, Bo chun already. Still got leftover.
Unless govt backtrack policy stance on trying to reduce 'cash poor house rich' situation.

the new rules are intended for marginal borrowers. Those who 'credit enhanced' to get
loan approval. First one to go up lorry when prices down 20%.

[Devil]

how is singapore household debt to GDP at 279%?

Singapore 2012 GDP is 345 billion
I take singapore household debt to be 2013 Q1 Liability under household balance sheet, which is 267 billion

the ratio i got is 0.77