Government imposes new curbs on property buys through debt servicing framework

[felixleong]

THE Government has imposed fresh curbs to cool the property market with the introduction of a new debt servicing framework.

From June 29, a buyer's monthly housing repayments cannot exceed 60 per cent of his income.

The Monetary Authority of Singapore will also refine rules related to the application of the existing loan-to-value (LTV) limits on housing loans.

They are to ensure the effectiveness of the limits to cool investment demand in the housing market.

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http://www.straitstimes.com/breaking-new...g-framewor

[CY09]

Hi,

Read the policy release. I have a question. What is the definition of gross monthly income (does it include employer's CPF contribution like what IRAS state as our assessable income?)

And my comments to this policy : Wow are there so many people out there who use 60% of their declared income for housing repayments! These people if they exist are insane.

[felixleong]

hi may I know where I can find the details of this policy release?

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oh i found it

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

[CY09]

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

[nsengkia]

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.

[felixleong]

thanks man

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i wonder if property counters like kepland capitaland citydev will be negatively affected or not, if so monday might see them being sold down, gg

[CY09]

Yup, the policy aim is to rein in excessive risk taking by the people.
Looking from the angle of how the investment demand will affect the overall property market's demand, I am eager to know how many % of properties loans currently are under the following conditions: 1) Individuals who own more than 1 property, 2) Those who are currently servicing with more than 60% of their income.

If the mentioned % comprises a significant proportion of our bank property loan portfolio, then the property market will be impacted badly; otherwise nothing much will happen to the current property market and this will tell us the new MAS guidelines were not designed to cool the property market (this is just the policy's unintended minor impact).

[opmi]

Variable income like bonus and rental income now has to take >30% haircut.

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Variable income like bonus and rental income now has to take >30% haircut.

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See Qn 3 on refinancing of existing loan with banks.

http://www.ifaq.gov.sg/mas/apps/download...a4b6716dcf

[pianist]

this is a toothless requirement, why? because -

6 Property loans in excess of the TDSR threshold of 60% should be granted only on an exceptional basis. The board of directors of the FI (or senior management in the case of an FI incorporated outside of Singapore) will have to approve policies and procedures relating to such exceptions. In addition, cases exceeding the threshold will need to be approved by the FI’s credit committee.

I guess most banks will exceptionally approve such cases, just need to draft new policies/procedures to trouble their senior management to ok it...keke :p

for the impacted borrowers, just need to write some convincing 'grandmother' stories why their TDSR threshold was breached or can be mitigated...keke :p

come on, if a new citizen (single) under age of 35yo can apply resale public housing hdb with their overseas parent (and their overseas house still intact & owned by them & no need to sell it) using appeal or convincing stories, I dun see any strong reason why local borrowers breaching TDSR threshold cannot borrow.

[opmi]

it is easier for junior bankers to reject loans application
than seek approval from credit comm or board to make exception.

MAS will also monitor these exceptions.