Singapore tightens housing loan limits as rates rise (updated)

Guocoland

29/09/2022 17:59

(Adds share price reaction in property developers)
    By Shubham Kalia, Chen Lin and Xinghui Kok
       SINGAPORE, Sept 30 (Reuters) - Singapore has unveiled a
package of measures for the property market, including
tightening lending limits for housing loans in response to a
rise in interest rates, as well as new steps to moderate demand.
    The move would ensure "prudent borrowing" and "avoid future
difficulties" in servicing home loans, said Singapore's central
bank, the Ministry of National Development and the Housing &
Development Board in a joint statement late on Thursday.
    The measures - including lowering the amount of government
loans available to buy public housing by 5 percentage points -
were announced late on Thursday and came into effect from
Friday.
    The interest rate floor used in bank loan calculations has
also been raised, reducing the amount of lending a person can
obtain in relation to their income level when buying from either
the public or private property market.
    OCBC economist Selena Ling said the steps should "dampen any
exuberance and slow the pace of price appreciation".
    The measures would have less impact on foreign investors as
they are more attuned to the global interest rate situation or
less dependent on loans, Ling said.
    The new measures are mainly targeted at the "overheated" 
resale public housing market, said Christine Sun, senior vice
president of research & analytics at OrangeTee & Tie.
    Analysts expect the measures to slow property price growth
in the fourth quarter. 
    Reuters had earlier reported record numbers of Singapore
public housing apartments were sold at over S$1 million
($697,739). 
    The government implemented a broad package of cooling
measures last December, but there was still a "clear upward
momentum" in public housing prices which increased by more than
5% since then to the end of the second quarter this year, the
authorities said in the statement.
    Meanwhile, private home prices also rose 3.5% in the second
quarter, five times the 0.7% increase in the previous quarter.
    The higher prices of apartments in Singapore, where real
estate is viewed as a safe-harbour investment, have been
exacerbated by COVID-19-related construction delays creating a
shortage of new units.
    Authorities said in Thursday's statement that interest rates
had risen significantly and are likely to go up further.
    "We urge households to exercise prudence before taking up
any new loans, and be sure of their debt-servicing ability
before making long-term financial commitments."
    Share prices of major developers in Singapore like City
Developments  CTDM.SI , GuocoLand  GUOC.SI  and Frasers Property
 FRPL.SI , fell more than 1.5% on Friday following the new
measures, compared with a 0.4% drop in the broader market.
    Many central banks across the world have increased interest
rates to fight inflation. In Singapore, bank mortgage interest
rates are determined by commercial banks. Three local banks have
in recent weeks temporarily removed fixed-rate home loans.
    Singapore's monthly inflation rate has remained elevated in
recent months, and economists widely expect the central bank to
tighten policy at its scheduled review next month.
($1 = 1.4332 Singapore dollars)
 (Reporting by Shubham Kalia in Bengaluru, and Chen Lin and
Xinghui Kok in Singapore, additional reporting by Tom Westbrook;
Editing by Leslie Adler, Christopher Cushing, Ed Davies)
 ((Lin.Chen@tr.com; Twitter @chenlin_sg;))