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. From September 30, 2022, the government introduced measures to ensure sustainable circumstances in the property market by assuring cautious borrowing and reducing demand, just nine months after a series of property cooling measures that went into force late in 2021. The most recent initiatives are anticipated to reduce housing demand and prices. To begin with, potential house buyers’ purchasing power has been reduced by limiting the amount that buyers can gear up.
The Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) for property loans given by private financial institutions are computed using a 0.5 percentage point higher medium-term interest rate floor. The TDSR and MSR for house loans will be calculated using a 4% annual interest rate floor, up from 3.50% before.
The TDSR maximum is 55%, which refers to the portion of a borrower’s gross monthly income that goes toward repaying monthly debt obligations, including the loan being requested for. Buyers of HDB flats and executive condominium (EC) units with a minimum occupancy time that has not expired are subject to an MSR cap of 30% on the share of total monthly income that goes toward repaying all property debts, including the loan being applied for.
For HDB flat buyers requesting a loan from the HDB, an interest rate floor of 3% per year is used to calculate the qualifying loan amount available, and the loan-to-value limit for HDB housing loans is reduced to 80%, down from 85% previously. In summary, prospective house buyers can borrow less. According to Edmund Tie, a S$1.5 million loan for a private home with a 30-year duration would now necessitate a monthly income of around S$13,000, up from S$12,200 earlier, assuming no other debt obligations.
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