Singapore announces property cooling measures

The Government unveiled a number of property cooling measures on Thursday Sep 29 that aim to manage demand and ensuring prudent borrowing amid rising interest rates.

The measures that come into effect from Sep 30 include tightening the maximum loan quantum limits. The loan-to-value LTV limit has been lowered from 85 per cent to 80 per cent for HDB loans.

Private home owners buying HDB resale flats are in a 15 month wait-out period to moderate demand in the HDB resale market.

The measure will be reviewed in future based on overall market conditions and housing demand, according to a joint press release issued on Thursday by the Monetary Authority of Singapore MAS and the Ministry of National Development MND.

The authorities said that market interest rates have risen significantly and are likely to increase further in the future, affecting borrowing costs for home purchases.

They said that to ensure prudent borrowing and to prevent future difficulties in servicing home loans. The Government will tighten the maximum loan quantum limits for housing loans.

For property loans from private financial institutions, the medium-term interest rate floor - used to calculate the total debt servicing ratio TDSR and the mortgage servicing ratio MSR -- has been raised by 0.5 per cent.

TDSR refers to the portion of a borrower's gross monthly income that goes towards repaying the monthly debt obligations, including the loan being applied for, while MSR is applicable to loans for HDB flats.

By raising the medium-term interest rate floor, authorities are tightening the criteria to assess a borrower's ability to repay the loan.

This will apply to property loans where the option to purchase OTP is granted on or after Sep 30. If there is no option to purchase, it will apply when the date of sale and purchase agreement is on or after that date.

The interest rates charged for mortgages will be determined by the private financial institutions.