Tag Archives: Monetary Authority of Singapore

TDSR doing its job, stats show

The impact of the Total Debt Servicing Ratio (TDSR) framework is being felt, with less than 10 percent of existing borrowers having a TDSR of more than 60 percent, reported The Business Times, citing statistics from the Monetary Authority of Singapore (MAS).

In fact, the prevalence of highly leveraged borrowers has declined for new housing loans, said the MAS.

“Almost all new housing loans are below the 60 percent TDSR threshold, with a significant proportion of new borrowers having TDSRs of less than 40 percent.”

Moreover, borrowers are now taking out fewer mortgages. Borrowers with more than one loan accounted for 20 percent of all new housing loans in Q3 2015, down from the 30 percent seen in 2011.

With this, the MAS is encouraging households to prepay their home loans in order to avoid monthly repayments and higher interest costs.

Banks also noticed that households have improved the risk profile of their home loans by paring down their mortgages.

Tok Geok Peng, DBS Bank’s Executive Director of Secured Lending, believes that the property cooling measures have helped homeowners to downsize their loan commitment via debt consolidation, capital repayment and other means.

Sherry Leong, Head of Secured Finance Solutions at Citibank Singapore, added: “We do not foresee any impact to (borrowers) with respect to the transition period, which should be sufficient for them to make any changes to their refinancing arrangement if required.”

The MAS revealed that the purpose of the three-year transition period is to encourage highly leveraged borrowers to “right-size their loans as early as possible”.

In February 2014, the central bank introduced a concession which broadened the exemption of the TDSR to include homeowners who breached the 60 percent limit but were hoping to refinance the loan on the property that they live in.

As for investment homes, the MAS allows a grace period until 30 June 2017 for refinancing, should the borrower agree to pay down a portion (usually at least three percent) of the outstanding loan.

Home prices would have risen by a third without cooling measures

If the Singapore government had not introduced a series of cooling measures to control the growth of private home prices following the 2008 Global Financial Crisis, such properties would have been more expensive than the current norm by up to a third, revealed a study conducted by the Monetary Authority of Singapore (MAS), and reported by TODAYonline.

Similarly, the number of private housing deals and the volume of mortgages in the city-state would have risen by a similar level, added the MAS.

The central bank also discovered that tax measures, like the Seller’s Stamp Duty (SSD) and the Additional Buyer’s Stamp Duty (ABSD), had a more significant effect on prices and transaction levels as compared to land supply policies and lending curbs like the loan-to-value (LTV) ceiling and Total Debt Servicing Ratio (TDSR) framework.

“The SSD reduced sub-sales significantly, whereas the ABSD raised the hurdle rate of return for property investors.”

This has led to an exodus of foreign property buyers. In Q4 2011, the share of private residential purchases by this group peaked at nearly 20 percent, but it plummeted after the ABSD was implemented.

As a result, weaker buying activity has dragged down property prices and mortgage lending, noted the MAS.

Meanwhile, the soft drop in home prices signals that Singapore’s housing market is moving to a more sustainable state over time, said the central bank, signifying that the authorities will likely keep the cooling measures in place.

In Q3 2015, private residential prices declined by eight percent from its peak in the third quarter of 2013.

However, MAS is still on the lookout for signs of renewed activity in the market in light of the continuing high prices in particular areas, such as those in the Outside Central Region, where it is still 30 percent above levels seen before the 2008 global economic downturn.