This is the second part of a two-part article on the recent residential property cooling measures implemented by the government to put some brakes on the heating residential property market in Singapore. Part one of this article includes the details of the new measures introduced in relation to additional buyer’s stamp duties.
Let us now take a look at the new changes introduced in relation to Loan-To-Value limit and Total Debt Servicing Ratio respectively.
Loan-To-Value limit
LTV serves as a safeguard against over-leveraging by requiring financial institutions to restrict home loans to a certain percentage of the value of the property purchased. The new LTV limit directly affects only those HDB flat buyers who are taking loans from HDB. LTV limit for HDB residential property loans from HDB was lowered from 90 percent to 85 percent.
Total Debt Servicing Ratio
TDSR limits the amount of money a person can borrow from a financial institution to purchase property. The threshold for TDSR was lowered from 60 percent to 55 percent. This effectively means that a buyer cannot borrow an amount for the purchase of property that would raise his/her total debt repayments, including any other loan and credit card debts beyond 55 percent of his/her monthly income.
In any case, most of the new measures have little to no effect on first time buyers. Also, some private property owners may choose to decouple in light of the new measure i.e an owner transfers his/her share of the home to another co-owner. This would then allow the transferor to buy a ‘first’ property under his/her name. However, owners of HDB flats cannot decouple, except under special circumstances (e.g. divorce).
Some analysts in the market feel these new measures will be ‘harder hitting’ compared to earlier rounds of cooling measures implemented by the government especially because of the greater ABSD rates. Others feel it would merely arrest the upward price momentum of both private and HDB properties.
It remains to be seen how these new measures will impact the market. Only time will tell.
Read part one of this article which includes the recent measures introduced in relation to additional buyer’s stamp duties.
This is the second part of a two-part article on the recent residential property cooling measures implemented by the government to put some brakes on the heating residential property market in Singapore. Part one of this article includes the details of the new measures introduced in relation to additional buyer’s stamp duties.
Let us now take a look at the new changes introduced in relation to Loan-To-Value limit and Total Debt Servicing Ratio respectively.
Loan-To-Value limit
LTV serves as a safeguard against over-leveraging by requiring financial institutions to restrict home loans to a certain percentage of the value of the property purchased. The new LTV limit directly affects only those HDB flat buyers who are taking loans from HDB. LTV limit for HDB residential property loans from HDB was lowered from 90 percent to 85 percent.
Total Debt Servicing Ratio
TDSR limits the amount of money a person can borrow from a financial institution to purchase property. The threshold for TDSR was lowered from 60 percent to 55 percent. This effectively means that a buyer cannot borrow an amount for the purchase of property that would raise his/her total debt repayments, including any other loan and credit card debts beyond 55 percent of his/her monthly income.
In any case, most of the new measures have little to no effect on first time buyers. Also, some private property owners may choose to decouple in light of the new measure i.e an owner transfers his/her share of the home to another co-owner. This would then allow the transferor to buy a ‘first’ property under his/her name. However, owners of HDB flats cannot decouple, except under special circumstances (e.g. divorce).
Some analysts in the market feel these new measures will be ‘harder hitting’ compared to earlier rounds of cooling measures implemented by the government especially because of the greater ABSD rates. Others feel it would merely arrest the upward price momentum of both private and HDB properties.
It remains to be seen how these new measures will impact the market. Only time will tell.
Read part one of this article which includes the recent measures introduced in relation to additional buyer’s stamp duties.
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