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Thread: New loan rules may stay to stabilise property market

  1. #1
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    Default New loan rules may stay to stabilise property market

    http://www.straitstimes.com/archive/...arket-20130701

    New loan rules may stay to stabilise property market

    Measures aimed at investors, not potential home owners: Khaw

    Published on Jul 01, 2013

    By Melissa Lin And Chia Yan Min


    TOUGHER new rules on property financing effective last Saturday are likely to be permanent and structural to stabilise the property market, Minister for National Development Khaw Boon Wan said yesterday.

    "It's not really a cooling measure as such, but it's a measure which will be quite permanent. It's a structural measure which is good to ensure a more stable property market," he said, noting that the current low interest rates are not sustainable.

    The Monetary Authority of Singapore (MAS) announced last Friday that banks have to use a standardised set of guidelines to assess property buyers' eligibility to borrow.

    Banks will not be able to approve a loan if the monthly repayments of a buyer's total debt obligations exceed 60 per cent of his gross monthly income.

    Mr Khaw noted that the new rules are targeted at investors, and are "not an issue" for potential home owners.

    "We do have buyers stretching themselves, buying second or third properties," he said.

    "And these are the people we worry about because when interest rates go up and they find that they cannot afford the increased mortgage, they may be forced to liquidate."

    He was speaking on the sidelines of the launch of the Sembawang GRC Memory Project at Fuchun Community Club, aimed at collecting memories of Sembawang from long-time residents. These will be collated into a book.

    Economists say the new rules are aimed at not just individual borrowers but also banks, so that they can better manage the impact when interest rates eventually start rising again.

    Central banks in the United States and Japan, among others, have been rolling out huge monetary stimuli ranging from holding down interest rates to multibillion-dollar bond purchases in an attempt to kick- start lacklustre economies.

    But the US Federal Reserve is expected to start curtailing its money- printing operations by the year end at the latest - a move that will put an end to the low interest rates driving stock market and real estate booms here and in the region.

    The new property curbs are a "prudent reminder" from MAS that "both lenders and borrowers should not get carried away", said CIMB economist Song Seng Wun.

    "There is a possibility that we are at the tail end of the prolonged low interest-rate environment and easy-credit situation.

    "The measures will ensure the integrity of the banking system should interest rates start to climb, and also ensure that borrowers at the margin don't overstretch themselves," he said.

    To prevent borrowers from overextending in their property purchases, MAS has also stipulated a floor in calculating interest payable on loans, even if prevailing rates are lower.

    For residential property loans, the minimum rate is 3.5 per cent, while the rate for non-residential property is 4.5 per cent.

    The new rules will prepare both banks and property buyers for the eventuality of higher interest rates, especially since the Fed's moves to "taper" its stimulus measures could come earlier than expected, said Bank of America Merrill Lynch economist Chua Hak Bin.

    OCBC economist Selena Ling agreed, adding: "The measures will ensure that if interest rates spike faster or earlier than expected, banks do not end up with a lot of non-payments or foreclosures on mortgages."

    As property loans have a long borrowing horizon, it "makes sense to use a more normalised interest rate", Ms Ling noted.

    Dr Chua said that while household borrowing has not been increasing at an "overly drastic" rate, low interest rates and a strong job market have propped up credit growth in recent years.

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  2. #2
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    while Singapore is rolling out more CMs, HKers are staging a street protest against the similar SSD/ABSD CMs in HK:

    http://www.singtao.com.hk/yesterday/pro/0704ho01.html

    some of the arguments are quite relevant here :

    政府原意是希望幫助基層人士置業,但現在推出多項辣招後,令資金全部湧到細價樓上,令該類物業樓價飆升,基層人士上車的難度反而大增。

    this is also what happened here. The SG gov's intention is also to control the rise of pty price, however the side effect is that, all money now flow to small quantum entry level condos, resulting in a big rise of price in this type of condos. End result : genuine upgraders are finding it even harder to upgrade.

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    We can only lament: lppl
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    happening to Coe also
    Ride at your own risk !!!

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    Quote Originally Posted by amk
    while Singapore is rolling out more CMs, HKers are staging a street protest against the similar SSD/ABSD CMs in HK:

    http://www.singtao.com.hk/yesterday/pro/0704ho01.html

    some of the arguments are quite relevant here :

    政府原意是希望幫助基層人士置業,但現在推出多項辣招後,令資金全部湧到細價樓上,令該類物業樓價飆升,基層人士上車的難度反而大增。

    this is also what happened here. The SG gov's intention is also to control the rise of pty price, however the side effect is that, all money now flow to small quantum entry level condos, resulting in a big rise of price in this type of condos. End result : genuine upgraders are finding it even harder to upgrade.
    In 1-2 years' time, there will be a big group of frustrated potential HDB upgraders/investors. They will go overseas to invest in properties.

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    At least there is still EC in singapore.

    Quote Originally Posted by amk
    while Singapore is rolling out more CMs, HKers are staging a street protest against the similar SSD/ABSD CMs in HK:

    http://www.singtao.com.hk/yesterday/pro/0704ho01.html

    some of the arguments are quite relevant here :

    政府原意是希望幫助基層人士置業,但現在推出多項辣招後,令資金全部湧到細價樓上,令該類物業樓價飆升,基層人士上車的難度反而大增。

    this is also what happened here. The SG gov's intention is also to control the rise of pty price, however the side effect is that, all money now flow to small quantum entry level condos, resulting in a big rise of price in this type of condos. End result : genuine upgraders are finding it even harder to upgrade.

  7. #7
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    Quote Originally Posted by amk
    while Singapore is rolling out more CMs, HKers are staging a street protest against the similar SSD/ABSD CMs in HK:

    http://www.singtao.com.hk/yesterday/pro/0704ho01.html

    some of the arguments are quite relevant here :

    政府原意是希望幫助基層人士置業,但現在推出多項辣招後,令資金全部湧到細價樓上,令該類物業樓價飆升,基層人士上車的難度反而大增。

    this is also what happened here. The SG gov's intention is also to control the rise of pty price, however the side effect is that, all money now flow to small quantum entry level condos, resulting in a big rise of price in this type of condos. End result : genuine upgraders are finding it even harder to upgrade.

    Well 2 prong. limited small unit build up i.e. min size for studio in out skirt.
    and 2nd limit the 60% repayment for 2nd unit. limiting no. of units people can buy eventually. i.e .ABSD etc.

    u cannot stop everything entirely. coz there will be people who need to stay and people who will invest.

    totally restrict it would means $ flow to something else too like industry. perhaps when int go up things wont get so crazy.

    For stay HDB have units too. just go get from government lor. leave the private alone.
    “Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity.”
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    Quote Originally Posted by hyenergix
    In 1-2 years' time, there will be a big group of frustrated potential HDB upgraders/investors. They will go overseas to invest in properties.

    in 1-2 yrs the interest rate will be different liao. the mind set will also change for the KS group.
    “Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity.”
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    OUT WITH THE SHIT TRASH

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    Quote Originally Posted by amk
    while Singapore is rolling out more CMs, HKers are staging a street protest against the similar SSD/ABSD CMs in HK:

    http://www.singtao.com.hk/yesterday/pro/0704ho01.html

    some of the arguments are quite relevant here :

    政府原意是希望幫助基層人士置業,但現在推出多項辣招後,令資金全部湧到細價樓上,令該類物業樓價飆升,基層人士上車的難度反而大增。

    this is also what happened here. The SG gov's intention is also to control the rise of pty price, however the side effect is that, all money now flow to small quantum entry level condos, resulting in a big rise of price in this type of condos. End result : genuine upgraders are finding it even harder to upgrade.
    Agreed! The price of MM units is being fuel by 2 factors: firstly, the fear of being left out due to the side effect of CM. Secondly, small price quantum. I suspect a very high % of property transaction in the last 2 years is in the MM unit category.pushing its psf price higher and higher. As an unintented outcome,the price gap between MM unit and normal size 3-4 bedder is getting wider. The price gap between OCR and RCR is disappearing, between OCR and CCR is narrowing. Will there be a big price dropped when interest rate increases gradually some time later? I believe mortgage default may be negligeable on the ground that the psf price pusher are mostly MM units buyers, with small quantum of loan, they may have better holding power.

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    Where will money flow to? It has to be tangible. No?
    Yee ha! Did I tickle your funny bone?


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    Quote Originally Posted by hyenergix
    In 1-2 years' time, there will be a big group of frustrated potential HDB upgraders/investors. They will go overseas to invest in properties.
    Maybe the investors, but will not be up-graders. Therefore, likely EC will dominate the housing market....leaving PC remains to the richer ones like always...

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    Quote Originally Posted by jslee78
    Agreed! The price of MM units is being fuel by 2 factors: firstly, the fear of being left out due to the side effect of CM. Secondly, small price quantum. I suspect a very high % of property transaction in the last 2 years is in the MM unit category.pushing its psf price higher and higher. As an unintented outcome,the price gap between MM unit and normal size 3-4 bedder is getting wider. The price gap between OCR and RCR is disappearing, between OCR and CCR is narrowing. Will there be a big price dropped when interest rate increases gradually some time later? I believe mortgage default may be negligeable on the ground that the psf price pusher are mostly MM units buyers, with small quantum of loan, they may have better holding power.
    If we pay attention to the instrinsic value of MM vis-a-vis bigger units in the same or comparable development, developers would more often than not like to use the MM psf as the pricing base and do relative discounting (in psf terms) for the larger units.

    This is obviously for the purpose of chasing higher profits. Rental looks at absolute quantum most of the time, and are better indication of true value, so one may soon realise the yield for larger units almost always does not match the small ones in % terms. That gives a clue to the true intrinsic value of such larger units.

    Therefore, it is correct to say that proliferation and uptake of MM units has distorted psf values - however, as consumers we need to understand that this is what developers would like us to perceive it. Rather, we should always take into account absolute quantum and the investment returns, potential or not.
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    Quote Originally Posted by hyenergix
    In 1-2 years' time, there will be a big group of frustrated potential HDB upgraders/investors. They will go overseas to invest in properties.
    in a few years' time, demand for MM will be higher. buyers r left with no choice as it will be the only affordable quantum with the so many CMs n curbs hanging around.

    in HK ppty prices had risen so high until many ppl rent iso buy, esp those young married couples. sg will be liddat sooner or later.

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