Loan curbs make homes 30% less affordable: Citi

[reporter2]

http://www.businesstimes.com.sg/arch...-citi-20130711

Published July 11, 2013

Loan curbs make homes 30% less affordable: Citi

S'pore households register a sharp spike in debt levels, led by mortgages

By Siow Li Sen


THE latest measures to ensure prudent borrowing have made residential properties less affordable for investors, said Citi in a recent report.

Someone making a second purchase will only be able to afford a property that is 30 per cent cheaper than was possible before the new rules kicked in, it reckons.

To moderate debt levels, banks now have to take into account borrowers' other outstanding debt obligations when granting a property loan such that the total debt servicing ratio (TDSR) does not exceed 60 per cent, based on the higher of the prevailing market interest rate or 3.5 per cent for residential properties (4.5 per cent for non-residential).

Singapore households have registered a sharp spike in debt levels, led by mortgages, Citi said. "Household debt relative to GDP has risen to about 77 per cent, similar to levels recorded before the Asian financial crisis nearly two decades ago," said the report.

The largest increase in household debt levels has come from mortgages with financial institutions (FIs), with FI mortgages accounting for 60 per cent of total household liabilities versus 51 per cent in Q12010, it said.

"As interest rates have been extremely low in the past few years, affordability (defined as household income, excluding employer CPF contribution) for the 75th-85th percentile ($13,500 per month for 2012), and assuming median price for condominium located outside central region ($1.04m for 2012), financed with 80 per cent loan-to-value, has been strong for households since 2009, supported by strong income growth and falling mortgage rates," said Citi.

According to Citi's calculations, under the new TDSR, someone in the 71st-80th percentile income buying a second property can now afford one with a maximum value of $1.96 million, down 32 per cent from $2.88 million before the measures kicked in.

[kane]

hence it is called cooling measure number 8. what should i do with the 40% savings? heh.

[dtrax]

How to hoot? It is jin expensive for 3rd/4th/5th owner.
Just imagine buying a 2rm Vue8 at 720k, you need min 560k cash/cpf on hand after factoring downpayment, absd, and small buffer cash.

Use the money for travelling round the world

[teddybear]

The 8th cooling measure (ops, correction - it is not a cooling measure! But no matter how I turn it around to look at it it just looks like cooling measure because buyers buying capability had just been cut again! So rename to "7th-(2) cooling measure!).
Anyway, all these basically drive people to buy smaller units since absolute price is lower which is what the majority can afford now.
So there goes! MM cheong ah!
However, unless there are new rules to clamp on MM, all those cooling measures are just useless!

How to hoot? It is jin expensive for 3rd/4th/5th owner.
Just imagine buying a 2rm Vue8 at 720k, you need min 560k cash/cpf on hand after factoring downpayment, absd, and small buffer cash.

Use the money for travelling round the world

[RCT]

Cannot be.... Singaporean all so rich... Loan curb will not help at all.. At the most pay in full loh...

[phantom_opera]

M3 growth rate needs CMs
China already trying to lower M3 growth to around 13% this year from 16% last year and 25% in 2009

Singapore GDP growth only < 2%, how can money supply grows at 10%pa

As long as money supply continue to grow @ 9-10%, Singaporeans will be eager to invest in properties as bond yield is a joke now, STI is roller coaster

[relax88]

Then how I want to buy.....