Property Cooling Measures Singapore in 2012

Emilyn Yap and Mindy Tan
The Business Times
Monday, Oct 08, 2012

SINGAPORE regulators signalled their concerns over still rising home prices yesterday, announcing fresh mortgage curbs to cap upward price pressures caused by low interest rates and fast credit growth.

The Monetary Authority of Singapore (MAS) said it will set an absolute limit of 35 years on the tenure of all residential property loans - both new loans and refinancings. It will also lower loan-to-value (LTV) ratios for new loans with a tenure of more than 30 years. The new rules will apply to both private homes and HDB flats and will take effect today.

"Monetary conditions worldwide are far from normal," said Deputy Prime Minister Tharman Shanmugaratnam, noting that the latest round of quantitative easing (QE3) in the United States and low interest rates have made credit easy, though this will eventually change.
"We are taking this step now to require more prudent lending, and will continue to watch the property market carefully," said Mr Tharman, who is also Finance Minister and MAS chairman. "We will do what it takes to cool the market, and avoid a bubble that will eventually hurt borrowers and destabilise our financial system."

The new rules - Singapore's sixth round of cooling measures - look set to affect not just home buyers and existing owners looking to refinance their mortgages, but also property developers and banks.

According to the central bank, over 45 per cent of new home loans have tenures exceeding 30 years. "We will not be surprised to see more measures being introduced if property prices do not stabilise (or correct slightly) over the next few months," said Barclays Capital economist Leong Wai Ho. MAS will cap the tenure of all new residential property loans at 35 years.

For refinancings, the tenure of the refinancing facility and the number of years since the first home loan for that property was disbursed cannot add up to more than 35 years.
Also, MAS will lower the LTV ratio for new home loans to individual borrowers if the tenure exceeds 30 years, or the loan period extends beyond the retirement age of 65 years.

The LTV will be 60 per cent for a borrower with no outstanding residential property loan, compared with 80 per cent previously, and 40 per cent for a borrower with one or more outstanding home loans, compared with 60 per cent before the new rules.
For non-individual borrowers, the LTV ratio for home loans will be lowered to 40 per cent from 50 per cent.

The MAS move comes after the Hong Kong Monetary Authority announced a 30-year limit on the maximum term of all new mortgages last month, following the launch of QE3. With the Federal Reserve looking to pump US$40 billion into the US economy each month until sustained jobs growth kicks in, worries about hot money inflows into Asia and asset price inflation have again emerged.