Amid a rough economic climate, cooling measures may halt the strong run-up in Singapore home prices
Amid a rough economic climate, cooling measures may halt the strong run-up in Singapore home prices. Just nine months after a series of property cooling measures that went into effect late in 2021, the government implemented measures to ensure sustainable conditions in the property market beginning September 30, 2022, by requiring careful borrowing and limiting demand. Recent steps are expected to lower housing demand and prices. To begin with, the purchasing power of potential home purchasers has been limited by limiting the amount that buyers can gear up.
The Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) for private financial institution property loans are calculated using a 0.5 percentage point higher medium-term interest rate floor. The TDSR and MSR for mortgages will now be computed using a 4% annual interest rate floor, up from 3.50% before.
The maximum TDSR is 55%, which relates to the percentage of a borrower’s total monthly income that goes toward monthly debt obligations, including the loan being requested. Buyers of HDB flats and executive condominium (EC) units with a non-expired minimum occupancy period are subject to an MSR cap of 30% on the portion of total monthly income that goes toward repaying all property debts, including the loan being applied for.
The qualifying loan amount available for HDB flat buyers requesting a loan from the HDB is calculated using an interest rate floor of 3% per year, and the loan-to-value limit for HDB housing loans is decreased to 80%, down from 85% previously. In conclusion, prospective home buyers can borrow less. According to Edmund Tie, a S$1.5 million 30-year loan for a private home would now require a monthly income of roughly S$13,000, up from S$12,200 previously, assuming no other debt obligations.
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