Fewer HDB dwellers buy private properties as cooling measures bite

Recent property measures have put a squeeze on the number of Housing Board dwellers buying private properties.

According to the latest early figures, buyers with HDB addresses picked up 3,700 new private homes in the first six months of the year. This seems to mark a slowdown from last year, which saw 9,985 such transactions across 12 months.

A similar trend has been seen in the private resale market. HDB upgraders bought just 1,550 homes in the first half of this year, compared to 5,261 for the whole of last year.

R’ST Research director Ong Kah Seng said that the market is feeling the effects of the cooling measures introduced in January to prevent home buyers from biting off more than they can afford.

Not only must buyers borrow less on their second housing loan, they also need to stump up 25 per cent of the property’s value, up from 10 per cent. Stamp duty for second property purchases also rose to 7 per cent, from none in the case of citizens.

“Besides, many HDB dwellers may have also bought their private properties last year due to a strong supply in attractive locations such as Punggol,” said Mr Ong. There were 21,000 private property units launched last year, compared to 10,000 so far in the first half of this year.

The latest figures on HDB upgraders were culled from caveats lodged voluntarily with the Urban Redevelopment Authority. They do not take into account whether buyers own or rent their HDB flats, or if they were buying their first or second private property.

Analysts, including Mr Ong, predict that the number of HDB upgraders will continue to shrink over the next two years.

This is partly because of new rules issued by the Monetary Authority of Singapore last month, which cap a person’s total monthly debt repayments at 60 per cent of his gross monthly income. That means that even car loans will be factored in when calculating how much a person can borrow to finance a property purchase.

DTZ’s head of Singapore research Lee Lay Keng believes the introduction of the total debt servicing ratio could lead to HDB upgraders scaling back their private property plans. For instance, a buyer earning $8,000 a month who already pays $1,500 towards a car loan instalment will be restricted to buying a second property worth $1.1 million, down from $1.6 million previously.

“The biggest hurdle for this group lies in the cash outlay that includes stamp duties, downpayment and other costs. This can amount to three times the annual income,” she added.

Finance executive Leong Yi Xing is waiting for the dust to settle in the wake of the new measures before deciding on upgrading from his five-room Bedok flat.

“HDB prices are still holding up very well compared to private property prices, which may have more room to drop. I’ll wait for the price between the two to narrow,” said the 31-year-old.


3 factors that could cut Singapore home prices by 30%

Mortgage rates must rise to 3.5%.

According to CIMB, assuming 1) mortgage rates rise to normalised levels of 3.5%, 2) a benign housing rental growth, and 3) rental yield spreads over mortgage rates are kept at around 100bp (currently achieved), we estimate that residential property prices could fall by 30-40% from current levels with all else remaining constant.

Here’s more:

In previous upcycles (e.g. 1995-1997 and 2006-2008), house prices and rents were still rising despite housing rental yields being in negative carry territories.

At the start of these upcycles, supply was tight, house prices were depressed and investment demand was on the rise. But the current upcycle appears to have the opposite attributes. House prices and rents are currently at historical highs.

Supply completions, both in the private and HDB segments, are expected to swell to new highs in 2013-16. Population growth, once driven by liberal immigration policies, is also expected to normalise with the recent population White Paper projecting a population of 6.9m by 2030, implying 80k-90k population growth per year.

This is about 40% lower than Singapore’s average population growth per year of 150k in the last seven years. At current house prices, we estimate rents would need to rise by 25% for rental yields to rise by 50bp.

We see limited scope for this to happen given the impending rise in supply completions and lower immigration growth. The current cooling measures put in place should also cap physical price growth from hereon, especially for the investment property market.

All these point to one conclusion – when mortgage rates rise, house prices are likely to fall.


A quiet second quarter for Singapore’s property auction market

THE Singapore property auction market softened in the second quarter, after an outstanding performance in the first quarter of the year.

The total transacted value achieved was S$5.045 million, with the auctioneer hammer falling on only four properties.

Despite the uncertainty that looms in the global economy, property owners still see auctions as a good avenue for sale and the number of properties listed for auction sale increased from 109 units in the first quarter to 113 in the subsequent three months.

Of those listed, Jones Lang LaSalle (JLL) marketed about one-third, spanning four property sectors.

Of the successful transactions, two residential properties were sold for S$4.05 million in total.

Located in district 15 and 11 respectively, these properties consisted of a two storey intermediate terrace at Woo Mon Chew Road, which was also one of the two mortgagee sales concluded this quarter, and a ground floor apartment at Novena Court.

Meanwhile, interest in the commercial market moderated.

While the first quarter saw 40 commercial properties come to market, the second quarter experienced a drop with 34 properties.

The largest transaction within the commercial sector in the second quarter was a small shop unit off North Bridge Road, which sold for S$430,000.

JLL head of auctions Mok Sze Sze said, “Buyers have adopted a wait-and-see approach during the most recent auctions. Bargain hunters are watching but are not yet ready to commit until the market shows greater clarity.”

She noted that sellers remain confident and that JLL had “recently received a listing for a rare two storey freehold titled terrace house in the Orchard area for our next auction”.


Total Debt Servicing Ratio (TDSR) framework

The Monetary Authority of Singapore (MAS) introduced the Total Debt Servicing Ratio (TDSR) framework for all property loans granted by financial institutions (FIs), with effect from 29 June 2013.

There are four major points in the TDSR framework:

1) 60% threshold

Total debt obligations cannot exceed 60% of total income.

2) 30% haircut

There is an arbitrary 30% cut of all variable and rental income, and 30% to 70% cut for the value of eligible financial assets.

3) 3.5% or 4.5% interest rate

Calculate new loan repayments based on medium-term interest rate of 3.5% for residential properties and 4.5% for non-residential properties, or prevailing interest rate, whichever is higher.

4) Income-weighted average age

If a borrower can’t meet the TSDR threshold, the guarantor will be the co-borrower.

Use income-weighted average age of borrowers rather than younger borrower’s age to determine loan tenure.

Who are the targets?

It is clear that the TDSR is meant to target three main groups of property buyers:

1) Marginal Buyers

Buyers who are highly leveraged with property or non-property debts, and buyers whose affordability depends on low interest rates and betting that it won’t go up too fast too soon

2) Multiple Property Buyers

Buyers who are buying their second, third or more properties with high outstanding loans, and buyers who bought properties recently at a high price, with low rental returns.

Note: Once interest rates go up, owners of multiple properties may not be able to refinance or repackage to lower monthly repayment even for the loan of their own residence if they exceed the TDSR threshold.

3) Two generation buyers

Buyers hoping to benefit from a longer loan tenure by putting the loan under a younger joint applicant’s name, and multiple property buyers hoping to benefit from higher LTV with a joint applicant buying for the first time

Message to parents: it’s time we stopped loaning loans on the next generation.

Work that kills

1) Bonus or commission-based jobs

With a 30% cut on variable income, “salarymen” relying heavily on bonus or commission will be at a disadvantage. For instance, salespeople who have the majority or all of their income based on commissions, or senior executives who have a high proportion of their income based on bonuses.

2) Self-employed, unemployed and retirees

They have to declare all their eligible liquid assets or other assets, amortize the value over four years, and decide whether they will be pledged or not for four years.

3) Staff working in mortgage departments

FIs are required to compute the borrowers’ TDSR with a mountain of information:

- Monthly repayments of all property and non-property debt obligations;

- Gross, variable and rental income after haircut; and

- Eligible assets declared with or without pledge.

And all declarations and supporting documents have to be obtained from applicants and validated with relevant parties. Deviations are not allowed since all exceptions have to be granted by the FI’s board of directors and credit committee.

The 60% threshold is just a start to get FIs familiar with the computation of TDSR. The LTV limits are also not permanent. They are to be reviewed over time and revised at any time. That means all calculations are only temporary and may be required to redo all over again.

Imagine the tremendous amount of extra workload added on the housing mortgage department!

4) Housing loan applicants

Before the TDSR rule, housing loan applicants normally take one week to obtain an approval-in-principal. With the new computation of TDSR, applying for a housing loan is now a long and tedious process.

It is a toil to submit details and proof for all property and non-property debt obligations, variable income and eligible financial assets.

Should owners ask tenants to renew their lease well in advance to ensure that the tenancy agreement has a remaining rental period of at least six months?

Should non-property debt loans include, apart from car loans, renovation loans, student loans and credit card loans, all other purchases paid by instalment like electrical appliances, overseas holidays, spa and beauty packages?


Download the pdf here

Q1 Do MAS’ new rules constitute a new round of property cooling
A1 The rules introduced by MAS, namely, the Total Debt Servicing Ratio
(TDSR) framework and refinements to MAS’ existing housing loan rules, are
structural in nature and meant for the long-term. They are aimed at
strengthening the credit underwriting practices of financial institutions (FIs)
and serve to encourage financial prudence as they help ensure that borrowers
do not take on excessive leverage in their property purchases. While the rules
are not targeted to address the current property cycle, they are consistent
with previous measures aimed at promoting sustainable conditions in the
property market, as the rules will require FIs to enhance their credit
underwriting standards and processes.
Q2 Why is there a need to introduce a TDSR framework and refinements
to MAS’ housing loan rules?

A2 MAS introduced the TDSR framework and refinements to MAS’ housing
loan rules to strengthen credit underwriting practices among FIs. The
framework will also help ensure that borrowers do not take on excessive
leverage in property purchases, which involve a relatively large and long-term
financial commitment for borrowers. The TDSR is a useful additional macroprudential tool to complement the existing loan-to-value (LTV) limits for
property purchases as it takes a more holistic account of the debt obligations
of the borrower. While the LTV framework helps to control the loss exposure
of FIs if a borrower defaults, the TDSR serves to calibrate the size of the loan to
the borrower’s repayment ability.
Thematic supervisory inspections and surveys carried out by MAS on FIs in
2012 revealed that the methodologies and practices used to compute TDSR as
well as the threshold TDSRs used to approve property loans varied widely across FIs. MAS’ inspection also highlighted other areas for improvement. For
instance, FIs did not always include or verify the total debt obligations facing a
borrower when assessing his repayment capability of his property loan. In
cases where the borrower was unable to meet FIs’ internal TDSR thresholds,
some FIs would base their assessments only on evidence provided by the
borrower on his holdings of liquid assets, as an indication of his ability to meet
his loan obligations over the next one to two years. The new measures
introduced by MAS will therefore help standardise and strengthen FI’s credit
underwriting practices.Total Debt Servicing Ratio Framework
(MAS Notices 645, 1115, 831 and 128)
Q1 When are FIs required to compute the TDSR of a borrower?

A1 FIs are required to compute the TDSR of a borrower for:
(i) any loan for the purchase of a property;
(ii) any loan otherwise secured by property; and
(iii) any re-financing loan in respect of a loan in (i) and (ii).
The property in relation to the loan applied for will include both residential and
non-residential property (e.g. industrial and commercial property), and will
cover property both in and outside of Singapore.
The TDSR rules will apply to loans where the application date is on or after 29
June 2013.

Q2 Why is the TDSR framework not applicable to FIs’ loans to corporates?

A2 Corporates are generally subject to a different set of credit assessment
criteria. However, in cases where the borrower is a sole proprietor or an
individual sets up a company solely to purchase property, FIs are required to
apply the TDSR rules to the relevant individual.

Q3 Do MAS’ TDSR rules apply to re-financed loans? If so, would this
prevent borrowers from re-financing their loans at lower interest rates,
resulting in financial hardship?

A3 In general, the TDSR rules apply to re-financed loans, but MAS will
exempt existing borrowers that are seeking to re-finance their mortgages if
they are owner-occupiers, and where –
(i) the option to purchase (OTP) the residential property was granted
prior to 29 June 2013;
(ii) the residential property is the only property owned by the
borrower (either by himself or jointly);
(iii) the borrower is one of the occupiers of the residential property;(iv) the borrower does not have any outstanding loan for the purchase
of any other property or the re-financing of such a loan, apart
from the residential property being re-financed; and
(v) the borrower does not have any outstanding loan (either in his
own name or jointly with another borrower) otherwise secured on
any property, including the residential property being re-financed,
or the re-financing of such a loan.
An FI should obtain documentary evidence to verify (i) to (v).1
MAS recognises that if the TDSR rules were applied strictly to this group of
borrowers and if they are unable to meet the requirements, they would not be
able to re-finance and enjoy any lower interest rates. This could have the
perverse effect of putting them at greater financial risk.
This exemption will also apply to borrowers who are owner-occupiers and are
unable to meet the existing 30% Mortgage Servicing Ratio (MSR) limit on refinancing loans extended by FIs in relation to HDB flats.
Q4 Are there any other exemptions from the TDSR rules?
A4 The TDSR rules apply to all individuals applying for loans for the
purchase of property or loans otherwise secured on property. However,
where the market value of the property comprises less than 50% of the value
Such documentary evidence should minimally include –
(i) a copy of the OTP in respect of the residential property being re-financed, where the OTP was granted
prior to 29 June 2013;
(ii) a written declaration from the borrower that:
(A) the residential property is the only property that he owns, either by himself or jointly;
(B) the residential property is for the occupation of one or more persons which includes the
(C) he has no outstanding loan (either in his own name or jointly with another borrower) for the
purchase of any property or the re-financing of such a loan, other than the residential property
being re-financed; and
(D) he has no loan (either in his own name or jointly with another borrower) that is otherwise
secured on any property (including the residential property being re-financed), or the refinancing of such a loan;
(iii) a printout of the borrower’s Account Summary page in myTax Portal at www.iras.gov.sg, listing the
number of properties held by the borrower;
(iv) a front and back copy of the National Registration Identification Card (NRIC) of the borrower, where
the address reflected on the NRIC is the same as the address of the residential property being refinanced; and
(v) a credit report from one or more credit bureaus showing the number of outstanding loans for the
purchase of or otherwise secured by property, or the re-financing of such loans, which are held by the
borrower (either in his own name or jointly with another borrower).of the total collateral pool on which a loan is secured, the loan will be
exempted from the TDSR rules.
In addition, bridging loans, under which any balance outstanding shall be
repaid within six months, are exempted from the TDSR requirements.
Q5 Why are TDSR rules not applied when borrowers take up nonproperty loans?
A5 FIs are not required to compute the TDSR of borrowers who apply for
loans that are not for the purchase of property or otherwise secured by
property (e.g. credit cards, study loans and car loans), as such loans currently
comprise a much smaller proportion of overall liabilities of a household or an
individual. Nevertheless, MAS will closely monitor the lending practices of FIs
and data trends for non-property loans, and may consider applying TDSR rules
if the need arises.
Q6 FIs are expected to take into account total debt obligations in
computing the numerator of the TDSR of a borrower. What is included in the
numerator of the TDSR?
A6 All outstanding debt obligations should be taken into account when
calculating the TDSR. Debt obligations include all property-related loans and
non-property related loans such as car loans, renovation loans, student loans,
credit card loans and other secured or unsecured loans. The FI is expected to
check with the credit bureau to ascertain the types of credit lines a borrower
has. The FI should then request for the necessary supporting documents from
the borrower to compute the debt obligations arising from each of these loans.
The TDSR will be computed as –
monthly total debt obligations x 100% gross monthly income
Q7 How are monthly debt obligations arising from revolving loans
included in the TDSR computation?A7 To determine the monthly repayment in relation to a secured revolving
loan, FIs will apply the applicable monthly interest rate on the amount that is
drawn down by the borrower under the loan.
To determine the monthly repayment in relation to an unsecured revolving
loan, FIs will apply the minimum amount that is due from the borrower.
The amount that is drawn down under a secured revolving loan and the
minimum amount that is due on an unsecured revolving loan will be based on
that which is stated in the latest available statement for that loan at the time
of application for the property loan. If the borrower is unable to provide a
copy of the statement, the FIs will apply the applicable monthly interest rate of
the loan on the total credit limit instead.
Q8 The computation of the TDSR should aggregate the monthly
repayments of total debt obligations. Are there any exceptions to this rule?
A8 In the case of a borrower applying for a loan for the purchase of a HDB
flat or an Executive Condominium (EC) purchased directly from a property
developer, an FI may exclude the monthly repayment in respect of the
borrower’s outstanding loan for an existing residential property, in computing
the TDSR for the HDB flat or EC. This exemption takes into account HDB’s
current rules on ownership, which require buyers of HDB flats or ECs
purchased directly from a property developer to sell their existing properties
within six months of TOP/CSC of the EC or taking possession of the HDB flat. In
such cases, the existing residential property and loan for the property, would
be sold off and discharged within six months.
This exemption will only apply where the borrower has, at the time of applying
for such a loan –
(i) only one existing residential property that he owns, either by
himself or jointly, and which he will be taking steps to sell;
(ii) an outstanding loan for the purchase of the existing residential
property or the re-financing of such a loan;
(iii) no outstanding loan (either in his own name or jointly with
another borrower) for the purchase of property or the re-financing
of such a loan, apart from the loan in (ii);
(iv) no outstanding loan (either in his own name or jointly with
another borrower) otherwise secured on any property, including the property referred to in (i), or the re-financing of such a loan;
(v) no property other than the property referred to in (i) that he
owns, either by himself or jointly.
An FI should obtain documentary evidence to verify (i) to (v).2
This exemption will also apply to the computation for the MSR of 30%, of
borrowers applying for a loan for the purchase of a HDB flat.
Q9 What is the rationale for using medium-term interest rates, rather than
current interest rates, in the TDSR computation? Why is the medium-term
interest rate set at a floor of 3.5% for residential property loans and 4.5% for
non-residential property loans?
A9 Given the long-term nature of housing loans, FIs should use mediumterm interest rates in assessing borrowers’ debt repayment ability. The use of
the medium-term interest rate will also help ensure that borrowers are not
overextended in their property purchases and are able to continue servicing
their monthly repayments even when interest rates increase.
Medium-term interest rates specified by MAS take into account the historical
interest rate trends and incorporate an assessment of forward-looking trends,
including projections of interest rates under stressed conditions. The mediumterm interest rates applied to different types of properties reflect the differing
risk premium associated with the types of properties.
Such documentary evidence should minimally include –
(i) a copy of the borrower’s signed undertaking to the HDB committing to complete the sale of his
existing residential property within the period stipulated in the undertaking;
(ii) a written declaration from the borrower that:
(A) he shall take steps, in accordance with the signed undertaking to the HDB, to sell his existing
residential property;
(B) he has no outstanding loan for the purchase of property or the re-financing of such a loan, apart
from that for the existing residential property;
(C) he has no outstanding loan otherwise secured on any property, including the existing residential
property, or the re-financing of such a loan;
(D) he does not own, either by himself or jointly, any other property other than the existing
residential property for which he shall take steps to sell;
(iii) a printout of the borrower’s Account Summary page in myTax Portal at www.iras.gov.sg, listing the
number of properties owned by the borrower; and
(iv) a credit report from one or more credit bureaus showing the number of outstanding loans for the
purchase of or otherwise secured by property, or the re-financing of such loans, which are held by the
borrower (either in his own name or jointly with another borrower).Q10 How is “gross monthly income” (denominator of TDSR) computed?
A10 The “gross monthly income” of the borrower refers to that before tax,
and excludes any contributions made to the borrower’s CPF account by his
employer. FIs will be required to apply a 30% haircut to (i) any variable income
(e.g. commission, bonus and allowance) from the employer; and (ii) rental
income. In the case of variable income, FIs will be required to take the average
of the monthly variable income earned in the preceding 12 months. FIs will
also be required to verify the rental income by obtaining a copy of the stamped
tenancy agreement signed by the borrower (as the landlord) and the party to
whom he has leased the property. The agreement should also have a
remaining rental period of at least six months.
In addition, FIs will be allowed to include certain eligible financial assets,
subject to haircuts and an amortisation schedule over 48 months for
conversion into “income streams”, into the denominator.
Q11 Why is a haircut applied on variable income?
A11 This is to reflect the uncertainty of such income, which can fluctuate
over time.
Q12 Why is the minimum haircut for variable income set at 30%?
A12 This is in line with the general industry practice. The purpose of
specifying a mimimum ratio is to standardise the computation of TDSR across
FIs. FIs may apply higher haircuts where appropriate, such as for incomes that
they assess to be highly variable or unsustainable over the loan period.
Q13 What are the eligible financial assets that FIs can include in the TDSR
A13 “Income streams” arising from assets that can be included in FIs’ TDSR
computations are confined to those related to liquid financial assets (i.e.
Singapore dollar and coins, including deposits), and a specified list of other
assets, namely collective investment schemes, business trusts, debentures or stocks, structured deposits, foreign currency notes and coins (including
deposits) and gold, which have a secondary market or reasonable basis for
valuation and to the extent that the asset is unencumbered.
Q14 Why does MAS set the amortisation period for eligible financial assets
used in the TDSR computation at four years?
A14 The stipulated duration of four years is based on the duration typically
taken for borrowers to redeem or re-finance their housing loans.
Q15 Why does MAS not require eligible financial assets to be pledged with
the FI before they can be included in the TDSR computation?
A15 Requiring a borrower to pledge his eligible assets provides greater
assurance on the borrower’s ability to repay his loan. However, this can also
be restrictive as it prevents borrowers from using the pledged assets in
contingencies. As such, to address the higher risks of unpledged assets, FIs are
required to apply higher haircuts to unpledged assets of assets that are
pledged for less than four years; details are in the table below. FIs are also
required to ensure that unpledged assets are still accounted for in the
borrower’s bank account statements before the disbursement of funds under
the property loan. This is to ensure that the unpledged assets used in the TDSR
computation do not include funds used in making the down payment for the
property loan under assessment.
Type of eligible financial asset
Haircut on eligible
financial assets pledged
for at least 4 years
Haircut on eligible financial
assets are unpledged or
pledged for less than 4 years
Liquid assets
(SGD dollar notes and coins (including
0% 70%
Other assets
(collective investment schemes, business
trusts, debentures or stocks, structured
deposits, foreign currency notes and
coins (including deposits) and gold)
30% 70%
Q16 MAS’ rules result in the standardisation of TDSR practices across FIs.
Can FIs choose to adopt more conservative practices than the stipulated
requirements (e.g. apply higher haircuts to variable incomes)?A16 Yes, MAS’ rules set out the minimum requirements. FIs can adopt more
conservative practices as long as they are compliant with MAS’ rules.
Q17 Why did MAS not set a mandatory limit of 60%? Can FIs exceed the
TDSR threshold of 60%?
A17 The coverage of the TDSR framework is more comprehensive than
banks’ current practices. The framework also includes detailed and
prescriptive rules on the computation methodology of the TDSR.
(For example, FIs are required to apply appropriate haircuts (of at least 30%)
for variable income and incorporate the medium-term interest rate (floored at
3.5% for residential properties and 4.5% for non-residential properties or the
prevailing interest rates, whichever is higher) when computing the TDSR for a
property loan. Where FIs take into account “income streams” arising from
borrowers’ holdings of eligible financial assets, they will be required to apply
haircuts to account for flight and price risks (e.g. 70% haircut on eligible
financial assets that are unpledged or pledged for less than four years) and
amortise the value of the assets over 48 months into “income streams” for
inclusion in the TDSR. In terms of coverage, FIs will be required to compute
the TDSR for all properties, regardless of type (i.e. residential, industrial,
commercial) and location (i.e. local or overseas).)
A 60% threshold under the prescribed TDSR framework would, in reality, be
tighter than a 50% threshold applied under less stringent definitions with less
It should be highlighted that MAS expects property loans subject to the TDSR
framework to not exceed the TDSR threshold of 60%. Loans in excess of the
60% threshold should only be granted on an exceptional basis and FIs should
clearly document the basis for granting property loans in excess of the
threshold. FIs are required to subject exceptional cases to enhanced credit
evaluation and to report such cases to MAS.
MAS will assess the impact of the TDSR framework and may review at a later
stage to assess the need to tighten the TDSR threshold or make it a mandatory
limit.Refinements to Housing Loan Rules
(MAS Notices 632, 825, 1106 & 115)
Q1 Why has MAS required borrowers of housing loans to also be the
mortgagors of the same residential property?
A1 MAS has received feedback that some property purchasers enter into
proxy arrangements with other parties, for the proxy to obtain a housing loan
on behalf of the actual property purchaser. This could be because the actual
property purchaser has outstanding property loans, whereas the proxy has
fewer or no outstanding housing loans, and can therefore obtain the new
housing loan at a higher LTV limit. To protect its interests, the FI will typically
require the owner to mortgage his property in favour of the FI, and will also
enter into a contractual arrangement with the owner to seek recourse against
the mortgaged property, in the event the borrower defaults.
To enhance the effectiveness of MAS’ LTV limits and help ensure that
borrowers do not circumvent the limits with proxy arrangements, MAS has
therefore required the borrowers of housing loans to also be the mortgagors
of the same property.3,4 Notwithstanding this, MAS expects FIs to continue
exercising diligence in ascertaining that property purchasers are not using
proxies to apply for housing loans, defeating the spirit of the rules.
Q2 How does MAS expect FIs to ascertain that the borrower of a housing
loan is also the mortgagor of the residential property?
A2 An FI should check that the borrower is stated as one of the purchasers
on the OTP, as well as that the borrower is subsequently listed as a mortgagor
in the document titled “Land Titles Act Mortgage”.
This approach is aligned with HDB’s rules on HDB concessionary loans.
This requirement will apply to –
(i) any loan for the purchase of residential property, the date on which the OTP was granted is on or
after 29 June 2013;
(ii) any re-financing loan of a loan referred to in sub-paragraph (i);
(iii) any loan otherwise secured by residential property, the application date of which is on or after 29
June 2013; and
(iv) any re-financing loan of a loan otherwise secured by residential property, the application date of the
re-financing loan of which is on or after 29 June 2013.Q3 Why has MAS required that a guarantor be brought in as a joint
borrower of a housing loan, if the FI assesses at the point of loan application
that the stated borrower would be unable to repay the loan?
A3 This is to take into account situations where an FI ascertains, at the point
of loan application, that the borrower would be unable to service any part of
the monthly repayments on his own, and would need the “guarantor’s”
assistance in repaying the loan.5
As the “guarantor” would in fact be servicing
the loan for that property purchase, if the “guarantor” were to apply for his
own housing loan subsequently, it would be inaccurate and imprudent for the
FI to regard him as a true guarantor on the first housing loan, and to treat his
debt obligations of the first loan as a mere contingent liability. Rather, the
“guarantor” should be brought in by the FI as a borrower of the first housing
loan, and the FI should apply the lower LTV limits to the “guarantor’s” own
housing loan when he applies for it.
This rule will enhance the effectiveness of MAS’ LTV limits, in that a housing
loan applicant cannot seek to circumvent the LTV limits by declaring himself
simply as a guarantor in respect of an existing housing loan, the monthly
instalments of which he actually services, so as to qualify for the higher LTV
limits in his property purchase.
Q4 Has MAS not considered that there could be cases where the use of
guarantors is for genuine reasons and requested by the FI purely for
additional assurance of repayment?
A4 MAS recognises that guarantor arrangements may be useful in some
cases, and has therefore not prohibited such arrangements in their entirety.
Specifically, where the guarantor is a true guarantor, required by the FI to be
brought into the arrangement for added assurance, and will only step in to
make good the monthly repayment of the housing loan if and when the
The TDSR framework will facilitate FIs’ assessments of whether a borrower is able to service the monthly
repayment on his own.
This requirement will apply to:
(i) any loan for the purchase of residential property, the date on which the option to purchase was
granted is on or after 29 June 2013;
(ii) any re-financing loan of a loan referred to in sub-paragraph (i);
(iii) any loan otherwise secured by residential property, the application date of which is on or after 29
June 2013; and
(iv) any re-financing loan of a loan otherwise secured by residential property, the application date of the
re-financing loan of which is on or after 29 June 2013.borrower defaults, the guarantor will not be treated as a borrower of that
loan. Consequently, in the event he applies for his own housing loan, he will
also not be subject to the lower LTV limits, by virtue of the existence of the
loan he is standing guarantee for.
Q5 Why has MAS mandated the use of the income-weighted average age
of joint borrowers?
A5 MAS has required that the age of the borrower to be used when
determining the applicable loan tenure for joint applicants be the average age
of the borrowers, weighted by the borrowers’ respective gross incomes. This
rule strengthens FIs’ credit underwriting practices, as the weighted average
better reflects each borrower’s ability to repay and the risk that this ability may
be reduced as he reaches the age of retirement. Thematic Inspection of Residential Property Loans Business
Q1 What was the impetus for conducting the thematic inspection on banks
that are major players in the housing loans market?
A1 The continued income growth in Singapore and low interest rate
environment globally contributed to a strong demand for residential properties
in recent years. Given the corresponding growth in banks’ housing loan
portfolio, the purpose of the inspection was to assess banks’ credit
underwriting standards and lending practices for such loans.
Q2 Given the findings reported in the thematic inspection report,7
there any concerns over the asset quality of banks’ housing loan portfolios?
A2 The banks’ housing loan portfolios remain healthy. Overall nonperforming loan ratios across the major banks providing housing loans are low.
Banks also subject their portfolios to regular monitoring and reviews as well as
stress testing to ensure that any vulnerabilities or deterioration in asset quality
is promptly detected and addressed.
Q3 Do the findings in the thematic inspection report present systemic
concerns in the credit underwriting practices of the banking sector?
A3 On the whole, MAS observed that banks have sound policies and
processes in place to manage their housing loans business. In addition, not all
the deficiencies observed were prevalent across the banks. The purpose of our
report is to highlight areas for improvement so that banks can further
strengthen their underwriting standards. To this end, MAS has also introduced
the TDSR framework to ensure standardised computation methodologies, as
well as to strengthen credit underwriting practices across FIs.
Q4 Given the findings of MAS’ thematic inspections, has MAS taken any
The report “Thematic Inspection of Residential Property Loans Business” was issued in Jun 2013 and can be
accessed on the MAS’ website.A4 MAS has directed the banks to promptly rectify all the deficiencies
observed. MAS has also held an industry briefing with the banks’ senior
management to convey the areas of concern, and to remind them to uphold
prudent credit underwriting, sound risk management and strong compliance
standards and practices.

J gateway sold out

Jurong East condo almost sold out on launch day

TWO property launches drew plenty of potential buyers yesterday with the J Gateway condominium setting the pace.

The project in Jurong East drew a blistering response from homeseekers although the Forestville executive condominium (EC) had its admirers as well.

The J Gateway showflat has been open for two weeks, allowing buyers to check out the 99-year leasehold development and lodge an interest.

About 1,400 blank cheques had been placed with the developer MCL Land before yesterday and 1,500 people in all turned up for the balloting process.

By the end of the day, 736 units in the 738-unit complex had been sold.

This is the first time since January’s tough property cooling measures that buyers have snapped up almost all the units on the first day of a launch.

Units were sold at an average of $1,480 per sq ft (psf), said MCL Land chief executive Koh Teck Chuan. The one-bedders went for about $1,778 psf, beating initial expectations of $1,650 psf, while four-bedders were sold at $1,400 psf.

Mr Koh added that the buyers mostly had local addresses and were living in the Jurong vicinity.

Buyers told The Straits Times that they were attracted by the condo’s proximity to Jurong East MRT station and four malls earmarked for the area. A hotel to be developed by Resorts World Singapore will also be built.

“No other area has this,” said Mr Lee Fatt, 50, who lives in Jurong and bought a two-bedroom unit at J Gateway for $1.2 million.

Another buyer, Madam Shirlyn Ng, 36, said that though prices were slightly high on a psf basis, she had no problem with it as she expects strong rental demand from expats working at the nearby International Business Park.

Meanwhile, the Forestville EC in Woodlands was being launched for the second time after developer MCC Land was found to have made changes to the development plans without approval.

MCC Land said about 210 units out of 653 had been sold as at 5pm, on the first day of sales.

This includes units that were sold to applicants who had lodged an expression of interest in December and were invited to place their bookings last weekend.

The Straits Times understands that about 80 out of 180 buyers who showed up last weekend bought a unit.

The Ecopolitan EC showflat in Punggol was open yesterday for prospective buyers to submit e-applications, but they were not able to buy units.

Applicants can start booking from Aug 3. Developer Qingjian Realty declined to comment on application figures.

There will be more buyers out today when Hong Leong Holdings launches One Balmoral in District 10. The 91-unit freehold project comprises one- to four-bedders, ranging in size from 592 sq ft to 1,657 sq ft.

Prices start at $1.5 million, said a Hong Leong spokesman.


J Gateway preview: all 738 units sold

Bankers rushing out paperwork before new MAS rules; units average $1,480 psf

ALL of the 738 units at 99-year leasehold J Gateway were snapped up at the development’s preview yesterday, as buyers sought apartments at the first condominium to be launched near Jurong East MRT station in 10 years.

The robust sales came right before the Monetary Authority of Singapore’s announcement yesterday evening that tightened rules for property loans, which take effect today.

BT understands that bankers were scrambling late yesterday to clear the loans that buyers will need to fund their J Gateway purchase. Said a source last night: “We are rushing out the paperwork now.”

Market sources told BT that the average selling price of units was $1,480 per square foot (psf). A 484 sq ft, one-bedroom apartment was sold for $1,778 psf – a record for the Jurong East area. When completed, the development will consist of one to four-bedroom homes.

A potential buyer at the preview yesterday said: “The crowd was so big that I couldn’t even go into the showflat. I had to wait outside.”

When contacted, MCL Land, a subsidiary of Hong Kong Land, declined to comment.

Prior to yesterday’s preview, many prospective buyers had already visited J Gateway’s showflat and put down blank cheques to indicate their interest.

Agents were said to have collected 1,400 of these cheques.

Indicative prices provided by marketing agent Huttons previously were for J Gateway to see buyers fork out $1,650 psf for a 474 sq ft one-bedder, to $1,450 psf for a 1,163 sq ft four-bedder.

J Gateway is located beside shopping malls JCube and Jem. When completed by mid-2016, it will comprise four towers with 259 one-bedders, 245 two-bedders, 181 three-bedders, 47 four-bedders and six penthouses – three of which are three-bedroom apartments, and the other three are four-bedroom units.

Sizes range from 474 sq ft for a one-bedder, to 1,432 sq ft for a four-bedroom apartment. Penthouses are between 1,485 sq ft and 2,024 sq ft in size.


Singapore’s COE System

What is a Certificate of Entitlement (COE)?

The COE gives you the right to own and operate a vehicle, for a period of 10 years. After that, you can pay to renew the COE for another 5 – 10 years (see Prevailing Quota Premium below).

COEs are divided into five categories. In order to own and operate a vehicle, you need a COE of the matching category:

  • Category A – Cars with engine capacity of 1600 CC and below
  • Category B – Cars with engine capacity exceeding 1600 CC
  • Category C – Goods carrying vehicles and buses
  • Category D – Motorcycles
  • Category E – This is an “open category” COE, which can be used for all of the above.

The number of available COEs in each category is determined by the Vehicle Quota System (VQS), which is figured by the government every six months.

Since the quota’s limited, not everyone who wants a COE can get one.

Using this method, car buyers bid against each other to win COEs.

The COE Open Bidding System

COEs for each category are bid for separately. The starting bid is $1, and you will pay only a bit more than that, assuming 90% of our population dies in a sudden zombie apocalypse. Otherwise, the eventual price of a COE (as of June 2012) falls between $70,000 – $80,000 for cars (Categories A and B).

COEs for goods vehicles and buses are around $59,000, and COEs for motorcycles hover around $1,700. You can check the most recent prices on One Motering COE

Here’s how it works:

  1. It starts when bidders submit their reserve price in the open bidding system. The reserve price is the amount being bid.
  2. The bidding system then automatically raises the Current COE Price (CCP) upward, by increments of $1.
  3. When the CCP exceeds a bidder’s reserve price, that bidder is out of the running (no chance of getting a COE).
  4. The CCP keeps rising, and stops once the number of bidders still in the running equals the number of available COEs.
  5. The bidding exercise then ends, and whoever’s still in the running is a successful bidder.

The latest CCP (whatever dollar amount it ends on) is called the quota premium (QP). All successful bidders in the same category pay the same quota premium.

Let’s say there’s room for just three Category A cars in Singapore
There are, however, five bidders. At the close of the bidding exercise, the results could look like this:

Reserve Price of Bidder

Successful or Not?

Bidder 1- $80,000


Bidder 2- $76,000


Bidder 3- $72,000


Bidder 4- $70,000


Bidder 5- $67,000


There are three winners because, of course, there are only three COEs available.

Now, say the QP was $70,001. Bidders 1, 2, and 3 would only pay $72,001, not the full reserve price.

There is an interactive demo on LTA website

When and How to Bid

There are two COE open bidding exercises each month. These are held on the first and third Monday of the month, and start at 12 pm. The exercise ends two days later (on Wednesday) at 4 pm.

There may be exceptions, such as if public holidays occur between Monday and Wednesday. In these cases, the bidding exercise will be extended.

Bidding for COEs Yourself

To bid for the COE yourself, you need an account with one of the following banks:

  • POSB / DBS
  • Citibank
  • OCBC
  • UOB (for non-individuals)

You can bid for COEs at DBS ATM machines. For the other banks, you will have to contact them for details (you may have to do the bidding via phone or Internet banking).

You must have a fixed bid deposit of $200 for Category D (motorcycles) bidding. For other categories, your minimum deposit is $10,000. You will be able to set the reserve price, and revise it upward once bidding starts.

Note that you cannot revise a bid downwards, nor can you withdraw a bid once it’s made.

If you’re a successful bidder, you will pay the difference between your QP and deposit amount upon registration. If there is an excess amount left in the deposit, the money can be used to offset the registration fees (RF) or additional registration fees (ARF).

Getting the Car Dealership to Help

Car dealerships can help with the bidding process, if you find it a pain.

For starters, you can purchase a car that already comes with a ready COE.

The second option is to give the dealer a month, after which you’re guaranteed to get a COE. The price can be unpredictable though, since the dealer will bid aggressively for you.

The third option is to give the dealer a reserve price, and have the dealer repeatedly submit bids for you until you win at that price. Obviously, if the reserve price you set is too low, there’s little chance of the dealer getting you a COE.

Last of All, the COE Rebate and Extension

When your COE expires, you can extend it for 5 – 10 years. There is no bidding; you simply pay the Prevailing Quota Premium (PQP), which is the moving average of the past three months’ QP.

When you de-register your car early, you get a rebate based on the amount of “unused time” on your COE.

Source : http://www.lta.gov.sg/content/ltaweb/en/roads-and-motoring/owning-a-vehicle/vehicle-quota-system/certificate-of-entitlement-coe.html


warren buffett 10 ways to build wealth

1. Reinvest Your Profits: When you first make money in the stock market, you may be tempted to spend it. Don’t. Instead, reinvest the profits. Warren Buffett learned this early on. In high school, he and a pal bought a pinball machine to put in a barbershop. With the money they earned, they bought more machines until they had eight in different shops. When the friends sold the venture, Warren Buffett used the proceeds to buy stocks and to start another small business. By age 26, he’d amassed $174,000 — or $1.4 million in today’s money. Even a small sum can turn into great wealth.

2. Be Willing To Be Different: Don’t base your decisions upon what everyone is saying or doing. When Warren Buffett began managing money in 1956 with $100,000 cobbled together from a handful of investors, he was dubbed an oddball. He worked in Omaha, not Wall Street, and he refused to tell his parents where he was putting their money. People predicted that he’d fail, but when he closed his partnership 14 years later, it was worth more than $100 million. Instead of following the crowd, he looked for undervalued investments and ended up vastly beating the market average every single year. To Warren Buffett, the average is just that — what everybody else is doing. to be above average, you need to measure yourself by what he calls the Inner Scorecard, judging yourself by your own standards and not the world’s.

3. Never Suck Your Thumb: Gather in advance any information you need to make a decision, and ask a friend or relative to make sure that you stick to a deadline. Warren Buffett prides himself on swiftly making up his mind and acting on it. He calls any unnecessary sitting and thinking “thumb sucking.” When people offer him a business or an investment, he says, “I won’t talk unless they bring me a price.” He gives them an answer on the spot.

4. Spell Out The Deal Before You Start: Your bargaining leverage is always greatest before you begin a job — that’s when you have something to offer that the other party wants. Warren Buffett learned this lesson the hard way as a kid, when his grandfather Ernest hired him and a friend to dig out the family grocery store after a blizzard. The boys spent five hours shoveling until they could barely straighten their frozen hands. Afterward, his grandfather gave the pair less than 90 cents to split. Warren Buffett was horrified that he performed such backbreaking work only to earn pennies an hour. Always nail down the specifics of a deal in advance — even with your friends and relatives.

5. Watch Small Expenses: Warren Buffett invests in businesses run by managers who obsess over the tiniest costs. He one acquired a company whose owner counted the sheets in rolls of 500-sheet toilet paper to see if he was being cheated (he was). He also admired a friend who painted only on the side of his office building that faced the road. Exercising vigilance over every expense can make your profits — and your paycheck — go much further.

6. Limit What You Borrow: Living on credit cards and loans won’t make you rich. Warren Buffett has never borrowed a significant amount — not to invest, not for a mortgage. He has gotten many heart-rendering letters from people who thought their borrowing was manageable but became overwhelmed by debt. His advice: Negotiate with creditors to pay what you can. Then, when you’re debt-free, work on saving some money that you can use to invest.

7. Be Persistent: With tenacity and ingenuity, you can win against a more established competitor. Warren Buffett acquired the Nebraska Furniture Mart in 1983 because he liked the way its founder, Rose Blumkin, did business. A Russian immigrant, she built the mart from a pawnshop into the largest furniture store in North America. Her strategy was to undersell the big shots, and she was a merciless negotiator. To Warren Buffett, Rose embodied the unwavering courage that makes a winner out of an underdog.

8. Know When To Quit: Once, when Warren Buffett was a teen, he went to the racetrack. He bet on a race and lost. To recoup his funds, he bet on another race. He lost again, leaving him with close to nothing. He felt sick — he had squandered nearly a week’s earnings. Warren Buffett never repeated that mistake. Know when to walk away from a loss, and don’t let anxiety fool you into trying again.

9. Assess The Risk: In 1995, the employer of Warren Buffett’s son, Howie, was accused by the FBI of price-fixing. Warren Buffett advised Howie to imagine the worst-and-bast-case scenarios if he stayed with the company. His son quickly realized that the risks of staying far outweighed any potential gains, and he quit the next day. Asking yourself “and then what?” can help you see all of the possible consequences when you’re struggling to make a decision — and can guide you to the smartest choice.

10. Know What Success Really Means: Despite his wealth, Warren Buffett does not measure success by dollars. In 2006, he pledged to give away almost his entire fortune to charities, primarily the Bill and Melinda Gates Foundation. He’s adamant about not funding monuments to himself — no Warren Buffett buildings or halls. “I know people who have a lot of money,” he says, “and they get testimonial dinners and hospital wings named after them. But the truth is that nobody in the world loves them. When you get to my age, you’ll measure your success in life by how many of the people you want to have love you, actually do love you. That’s the ultimate test of how you’ve lived your life.”

Singapore Haze condition

Hazy conditions for Developers

Singapore’s property developers area unit closely observance the haze scenario that has seen the city-state blanketed in smoke from forest fires in land for abundant of the week.

The waste matter Standards Index (PSI) reached a record high of 401 at twelve noon on Friday mealtime – golf stroke air quality within the city-state can into the “hazardous” vary.

Chng Kiong Huat, administrator, Property Services, Far East Organization, told PropertyGuru: “In read of the poor air quality conditions, Far East Organization is functioning closely with our partner contractors to conduct thorough risk assessments of all on-going comes.

“We think about the health and safety of our construction partners a vital priority and support all contingency and mitigation measures to safeguard the development personnel from the unhealthy levels of pollutants rendered by the haze.

He adscititious that potential measures being thought-about embrace supplying of protecting masks and therefore the imposition of stop work orders if the air quality persists at the terribly unhealthy level.

“Together with our partner contractors, we’ll still monitor things and implement the mandatory safety measures as counseled,” he said.

A voice for CapitaLand said: “CapitaLand is closely observance PSI readings to confirm that the health, safety and well-being of our workers, tenants, shoppers and repaired residence guests area unit safeguarded.

“The cluster is creating applicable masks on the market to any or all its one,960 workers in Singapore and has aware them of precautional measures. workers in any respect of our properties have conjointly been briefed to advise our tenants, shoppers and guests on these precautional measures.

“To make sure that the cluster responds to such contingencies in a very timely and effective manner, CapitaLand cluster managers area unit sceptred to assess and permit workers to figure from home once the requirement arises.

“At our worksites, we’ve got worked closely with our main contractors and sub-contractors and stepped up vigilance over workers’ health, safety and well-being. Besides briefings on precautional measures, we have a tendency to area unit operating with our contractors to confirm that applicable masks area unit issued. we’ve got conjointly stopped work quickly once visibility is affected and at some elements of our comes that area unit underneath construction.”

A voice for town Developments Ltd (CDL) said: “In response to the worsening haze conditions, CDL has issued associate Environmental, Health and Safety (EHS) responsive to all our builders to cue them to be alert and to fits all advisories and tips issued by the relevant government agencies together with the National surroundings Agency and therefore the Ministry of work force.

“The builders area unit to watch things closely and should conduct risk assessments to require the mandatory EHS measures to safeguard the welfare of their employees on the worksite that may be a prime priority.

“CDL staff have conjointly been activated to stay a detailed police investigation on all worksites to watch things.

CDL has suggested all its builders to require applicable protection measures that embrace the supply of masks, identification of a lot of vulnerable staff, e.g. those with heart or respiratory organ issues, avoiding non important out of doors works involving high physical effort, assessing the exposure of out of doors works reckoning on PSI level moreover as implementing a lot of rest rotations.

“With poorer visibility, there’s conjointly a lot of safety observance onsite,” the voice adscititious,

A voice for the development Board (HDB) confirmed that its contractors area unit needed to abide by Ministry of work force tips. HDB is continuous to watch things closely, the voice added.

Resale Property Market

Slow recovery in private resale property market

SINGAPORE: Market watchers have aforementioned the personal marketing property market is seeing a gradual recovery once a drop in transaction volume within the first quarter this year following the introduction of cooling measures in January.

Based on preliminary estimates, some analysts aforementioned sales might probably double within the second quarter compared to the primary quarter.

New personal homes could still pull within the patrons, however some analysts aforementioned the marketing holding market is additionally learning.

Real estate agency PropNex aforementioned it’s seen marketing dealings volume jump twenty per cent in Gregorian calendar month and should.

Enquiries and turnout at viewings of marketing units have conjointly improved, for the most part as a result of patrons believe marketing properties provide higher price and comparable rental yield.

Mohamed Ismail, CEO of PropNex, said: “Sky environs at Bishan… is S$1,600 Popular Struggle Front (per sq. foot). Bishan 8, opposite, goes at S$1,100. In alternative words, once you get a marketing unit, you’re planning to pay lower per sq ft… absolute quantum goes to be lower, which suggests you pay lesser ABSD (additional buyer’s stamp duty) to the govt..”

SLP International Property Consultants estimates that some three,600 to 4,300 units of each completed and uncompleted units within the marketing market might move within the second quarter.

This is up from regarding two,200 units sold-out within the previous quarter.

Based on caveats lodged, analysts aforementioned that regarding three,500 marketing units are transacted from January to early could this year.

About common fraction of them square measure “family-sized” units on top of a hundred sq. metres.

They additional that the marketing property market is probably going to envision a property recovery, however there square measure potential risks yet.

Nicholas MAK, administrator of SLP International Property Consultants, said: “If costs still increase and rental yields still be compressed, one in all the risks is that if interest rates were to extend this year or next year, we have a tendency to might see that this is able to truly discourage investors, as a result of if rental yield is compressed to such a coffee level, any increase in interest rates would build that investment property less enticing.”

Mr MAK aforementioned that presently, the typical rental yield for personal homes in Singapore hovers between one.8 per cent and a pair of.2 per cent.

Some analysts aforementioned that costs within the marketing market square measure catching up with costs of units in new launches. For the entire year, they aforementioned that costs of marketing personal properties might go up by the maximum amount as eight per cent, blackball any further cooling measures.

Some analysts additional that the full units of marketing personal homes sold-out in 2013 ought to be appreciate the fifteen,136 transacted last year.