S'pore banks tighten credit criteria as property prices fall
Singapore banks tighten credit criteria as property prices fall
Consumers urged to check if banks are able to meet valuations to avoid overpaying for properties
Dec 18, 2008
As property values in Singapore fall, banks continue to offer home loans but with much more selective terms and conditions. Poor demand and dipping prices are driving banks to stick to lower property valuations in anticipation of further price falls.
It has been reported that a homebuyer had to cancel a purchase upon learning that the banks’ valuation of the property was less than what the buyer was supposed to pay.
In another case, a condominium unit owner could not take advantage of lower interest rates by refinancing his devalued property without having to spend more. This was due to the reduced value of the unit, which meant the bank could not extend a large enough loan.
Banks are able to grant up to 90 per cent of the purchase price or valuation, whichever amount is lower. In a case where the sale price of a property exceeds the valuation (which is determined by an independent professional), the buyer will have to make up the shortfall as many banks are not able to match property valuations.
To avoid overpaying for a property, buyers can check to see if banks can match the valuation to the property’s purchase price. The majority of banks for now prefer to offer up to only 80 per cent financing. However, customers are still able to attain 90 per cent financing if their financial profile can support it and their application meets the bank’s criteria.
Consumers seeking loans for property purchase should get prior approval or have more cash on hand, as banks become more stringent in credit criteria. With the current fluidity, homebuyers should re-check their loan eligibility after one month.
