Tighter mortgage rules better for current property market

The current low mortgage rate is one of the main contributors to the stubbornly high property prices here.

In the United States, the average mortgage rate is about 3.65 per cent despite the Federal Reserve maintaining its interest rate at near zero. Meanwhile, Hong Kong recently raised the risk weighting for new mortgages, and there has already been an impact on interest rates.

It would be good if the Monetary Authority of Singapore (MAS) could also administrate a gradual increase in mortgage rates here, to increase the holding cost of buying investment properties.

At current property prices and with rental yields expected to soften, a gradual increase in mortgage rates would have an immediate impact on property prices. By tightening mortgage rules now, the MAS would have better control over the stability of our financial institutions and our economy should there be sudden increases in interest rates in the near future.

Also, foreigners are more willing to pay the Additional Buyer’s Stamp Duty and park their money in Singapore’s real estate than buying risky investment assets elsewhere.

Just having a 10 per cent share of foreign buyers of properties here could provide a false sense of positive market sentiment towards our real estate. Developers would be quick to exploit more foreign buying to support property prices.

From PATRICK TAN CHOON HONG

Source : Today – 2 May 2013

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