A possible sign that the effects of government-initiated cooling measures are taking effect, newly released data from Credit Bureau Singapore (CBS) suggest that property investors are scaling back on their purchases.
(Is the smaller number of buyers with existing housing loans a result of recent cooling measures? Image courtesy of thinkstock.)
The figures, gathered from all major banks, indicated a significant drop in the number of buyers who already have an existing loan or more, taking out new property loans. The proportion of these buyers dipped to 33% in the first eight months of 2011, from 38% for all of 2010.
Experts say that buyers entering the market with pre-existing loans are usually property investors.
However the reverse cannot be said. Those taking out a new loan with no existing mortgage are not necessarily first-time home buyers, they could also be investors. CBS pointed out that some of these buyers may have already fully paid off their home loans, or are owners of Housing Development Board (HDB) flats with HDB loans. This means the figures could be underestimating the actual number of investors in the market.
No matter the number of investors, one thing is clear: it is evident that January’s tough cooling measures – not to mention those previously done in February 2010, August 2010 and September 2009 – are putting a downward pressure on investor demand.
The latest rules include a reduced loans-to-value (LTV) ratio of 60% for buyers with an existing housing loan. The previous ratio was 70%. As such, a home buyer now has to come up with an upfront figure of 40%.
Furthermore, constantly rising housing prices (prices shot up 18% in 2010 and saw an additional 6% hop in the first nine months of 2011), an even larger amount has to be footed upfront now, further reducing the buyer pool. In fact, experts feel this new rule will probably be the main deterrent for property investors. SLP International research head Nicholas Mak told The Straits Times that the tumbling number of loan holders who have an existing mortgage goes to prove that the lowered LTV ratio in particular “was effective and had an impact”.
Another measure is the raising of stamp duty of up to 16% on sellers if the property is sold within a year of purchase. The sellers’ stamp duty is payable if a home is sold within four years, where it was previously three.
The result: CBS reported that 50,588 people took out loans from January to August 2011 – a 6% dip from the 53,803 figure in the same period last year.
PropNex chief executive Mohamed Ismail commented that the cooling measures had the dual effect of ensuring financial institutions were not overexposed, and that buyers were practicing prudence in housing purchases.
In agreement, OrangeTee executive director Steven Tan felt the 33% proportion is “healthy and acceptable”. He added that it was unlikely that the authorities will implement any more measures. “The reduced gearing will mean that Singaporeans are less overexposed and, should interest rates rise or if the residential market turns, they will be less affected.”
However, Tan noted that an unintended effect was a growing number of developers building smaller apartments in reaction to these policy changes. CBS data seems to agree, showing that loans under $1 million continue to dominate: they make up 90% of all new loans since January 2010. But judging by the strong demand these smaller homes are enjoying, perhaps the worst the price inflation is over.
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Related Categories: Daily Property News and Updates, Legal Matters
Tags: CBS, cooling measures, Credit Bureau Singapore, effects of property cooling measures, HDB Singapore, home loan, housing loan, investing Singapore property, Loan to Value, LTV Singapore, private housing market in Singapore, private housing prices in Singapore, property investment
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