http://www.straitstimes.com/archive/thursday/premium/top-the-news/story/sharp-drop-new-home-loan-applications-20140501
Sharp drop in new home loan applications
Banks report up to 45% fall, after lending curbs put in place last June
Published on May 1, 2014 1:33 AM
By Yasmine Yahya Finance Correspondent
HOME loan applications have dived sharply at DBS and OCBC in the wake of strict lending rules introduced last year and real estate agents are feeling the pinch too.
The statements from bank chiefs yesterday only confirmed what property agents have been saying for months.
DBS chief executive Piyush Gupta told the bank's results briefing yesterday that new mortgage applications in the first three months of the year fell about 45 per cent from the same period a year ago.
OCBC chief executive Samuel Tsien had similarly grim numbers to share at his results briefing.
"New loan origination has come down quite a bit. If you compare it versus... two years ago, it's down by about 40 per cent," he said.
Monetary Authority of Singapore (MAS) data reflects a similar trend since the total debt servicing ratio (TDSR) framework was introduced last June.
The volume of new housing loans contracted 35 per cent to $8.8 billion in the third quarter of last year, from the same period the year before.
Home loans growth hit its peak in September 2010, when the outstanding pool of mortgages grew 22 per cent year-on-year.
Preliminary MAS data shows that outstanding home loans grew just 7.9 per cent in March, from the same month last year.
Property agent Ryan Khoo said that he and his fellow realtors have definitely suffered a sharp drop in business since the TDSR took effect.
"Agents are struggling. Transactions have dropped everywhere across the island, whether in industrial, residential or commercial property," he said.
"It's hard to put a number to it but I would say transactions have easily halved, compared with the same time last year."
Refinancing activity has also come to a near standstill, he said, as this too is now strictly guided by the TDSR limits.
Fellow agent Paul Lim added: "Since the TDSR framework began, I've had four to six cases of (clients) wanting to buy, but when they go to the bank they cannot get the loan amount they were hoping for, so they cancel the transaction."
But the banks were quick to note that the drop in new loan applications does not mean that their overall loan books are shrinking.
"There is a slowdown but it's growing," noted DBS' Mr Gupta.
"We can see the loan book continuing to grow next year as well. There is a building and construction pipeline, so we're not seeing a shrinkage in the loan book in the foreseeable future."
OCBC's Mr Tsien said property buyers who bought before the TDSR framework kicked in are now paying off their loans.
"For this year, we expect the growth to continue to be quite strong," he said.
"By next year, a majority of the previously committed loans would have been drawn down so you will expect the loan growth to slow down."
[email protected]