Published November 02, 2012

Hard to gauge impact of latest cooling measures

Some may pull out because of higher instalments: Gupta

By Siow Li Sen

IT remains to be seen if the latest Singapore property cooling measures will hurt the bank's home loans growth, which was up 10 per cent year to date, said DBS Group Holdings' chief executive Piyush Gupta.

Speaking yesterday at the group's third-quarter results briefing, Mr Gupta said "don't know" when asked if the latest measures announced on Oct 6 would slow down home loans. Mr Gupta is the first bank chief to comment on the impact of the property measures.

DBS, the nation's largest home loans bank, saw total group mortgages rise more than 8 per cent from a year ago and almost 7 per cent year-to-date to $44.1 billion. The bank's total loan book rose 9 per cent year-to-date, driven by Singapore property and corporate loans. Housing loans make up 25 per cent of total loans growth, he said.

He pointed out that the last two macro-prudential measures succeeded in driving home loans growth down for two to three months, and then things went up again.

Mr Gupta said the latest measures, which lowered the loan to value (LTV) ratio considerably, could see some people pulling out because of affordability issues as monthly instalments will go up. The LTV is now 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 the previous 60 per cent.

Under the rules, there is now an absolute limit of 35 years on the tenor of all residential property loans and the refinancing loan market is expected to be hit hard.

Refinancing makes up 20-25 per cent of DBS' total home loans while 75 per cent are new loans, he said.

He expects the impact on refinancing business to be neutral, he said.

And if the measures work, it could lead to lower property prices which could bring borrowers back into the market, he said, adding that the current low interest rates continued to be a strong factor.

Mr Gupta said that DBS' new home loan bookings in October was holding up. In the past three weeks, it "has been as strong, as strong as ever", he said.

But he noted that October's bookings were for options signed or purchases committed before the Oct 6 measures, and "not reflective of the new measures".

"It's tough for me to gauge what will happen . . . we need to watch through the next few quarters."

Total bank loans growth slowed to 0.7 per cent over the month of September, as sluggish economic activity dampened the expansion of business loans.

Preliminary figures from the Monetary Authority of Singapore yesterday show that domestic banking unit loans edged higher to $472.3 billion by the end of September, slower than the 2.3 per cent growth in August. Housing and bridging loans - the largest consumer loan category - rose a slightly faster 1.2 per cent month-on-month and 14.5 per cent year-on-year.