Tighter loan limits could feed demand for smaller flats, raise rentals further, curb overall buying

by Albert02

Tighter loan limits could feed demand for smaller flats, raise rentals further, curb overall buying

Tighter loan limits could feed demand for smaller flats, raise rentals further, curb overall buying. Tighter loan limits announced late last night, according to industry observers, will restrict homeowners’ purchasing power and put a strain on affordability. This may result in increased demand for smaller units, particularly resale 4-room HDB flats, higher rental rates, and a decrease in private property demand.

“Overall, the new rules create market frictions and are likely to impede resale HDB price increases,” said Wong Xian Yang, Singapore head of research at Cushman & Wakefield. However, given the continuous underlying housing demand, low unemployment rates, and an expected shift in demand from the private market, HDB price increase could continue in the fourth quarter of 2022, albeit at a considerably slower pace than in prior quarters.

“These policies will indirectly temper the private home market by decreasing the pool of HDB upgraders earning from increased HDB prices,” Colliers’ Catherine He said. As a result of this segment’s reliance on upgraders, mass market projects may be the most impacted. Buyers with a lot of cash, including high-net-worth individuals, will be less affected because they will need less financing.” He stated that “non-residential property likely to be most affected by the latest measures would be commercial properties purchased by individuals for investment – these include shophouses, strata office and retail units, as well as smaller industrial properties” because the new loan limits did not apply solely to residential property.

To maintain cautious borrowing and moderate demand, the government today increased the medium-term interest rate floor used to calculate the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) for real estate by 0.5 percentage point. Currently, the rate is 4% for residential properties and 5% for commercial ones.

Borrowers seeking HDB loans for public housing will have their loan amounts calculated using a 3% interest rate floor, while the Loan-to-Value (LTV) maximum for HDB housing loans will be reduced from 85% to 80%.

Click the image to read the full details of report.
Source:
https://www.businesstimes.com.sg/real-estate/tighter-loan-limits-could-feed-demand-for-smaller-flats-raise-rentals-further-curb


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