Govt: Beware oversupply in Iskandar

Real estate investments in other countries could suffer losses and it would be hard to find tenants if there is a flood of properties, according to Minister for Culture, Community and Youth Lawrence Wong, who was speaking on behalf of Deputy Prime Minister and MAS Chairman Tharman Shanmugaratnam during a parliamentary session on Monday.

He was responding to reports about the aggressive construction activity in Johor and Iskandar, and also fielded questions from MP Lee Bee Wah on how many Singaporeans have purchased properties in Iskandar and how are local banks protected if many of these individuals default on their mortgages.

“There is indeed a real concern about future oversupply in the property market there and hence the potential decline in value of homes.

“Based on data from Malaysia’s National Property Information Centre (NAPIC), there are around 336,000 new private residential units in the pipeline — more than the total number of private homes in Singapore,” he said.

This number excludes the planned properties for the 1,400ha reclaimed land near Tuas Second Link that are expected to enter the market by 2020, Wong noted.

Given the situation, buyers have become more cautious and the number of Malaysian properties purchased through local property agencies has plummeted to 838 in 2014 from 2,609 in the previous year.

However, not all Singaporeans are aware of this, so the central bank and the Council for Estate Agencies (CEA) will continue to warn them about the risks involved in foreign property purchases.

Mr Wong also said the exposure of Singapore banks to overseas real estate is very small as they are strict on granting mortgages for such properties. In fact, such loans account for only two percent of the mortgage portfolios of major financial institutions in Singapore.

“In addition, the Total Debt Servicing Ratio (TDSR) framework introduced by MAS in June 2013 requires lenders to assess the debt servicing ability of their customers for all new property loans, regardless of whether the property is in Singapore or overseas,” he added.

Advertisements

Comments are closed.