Investors head north with new loan curbs

Central bank’s move to ensure a more sustainable property market makes Iskandar Malaysia more attractive now among Singaporeans and expatriates.

Impiana Nusajaya Resort Apartments located in Nusajaya, Iskandar Malaysia.

Property prices in Singapore are showing no signs of abating causing the Monetary Authority of Singapore (MAS) to impose new loan guidelines to prevent a further spike in property prices.

On 5 October, the MAS announced several restrictions to ensure a more sustainable property market.

These include a maximum loan tenure capped at 35 years and lower loan-to-value (LTV) limits for those taking loans beyond 30 years or whose loan period extends beyond the retirement age of 65-years-old.

In the latter, the LTV will be 40 per cent for those with one or more outstanding residential property loans and 60 per cent for those without.

“MAS’ move is part of the Government’s broader aim of avoiding a price bubble and fostering long term stability in the property market,” the MAS said in a statement.

MAS’ move will now make United Overseas Bank (UOB) new 50-year mortgage loan redundant.

Experts say they welcome the MAS’ new guidelines as it may cause Singaporeans to commit beyond their financial means.

“I think it is good that the government tried to put a lid on loan tenure. This is to ensure Singaporeans do not over spend on properties. Without such controls, it is inevitable that some Singaporeans would try to maximise their loans and stretch themselves. So it is prudent for the government to put such controls in place,” said Getty Goh, director at Ascendant Assets Pte Ltd.

Rising property prices

Figures from the Urban Redevelopment Authority (URA) showed that the Private Property Index (PPI) surged by 0.4 per cent in the second quarter to reach an all time high of 206.9 points.

Meanwhile, the HDB Resale Price Index (RPI) increased by 1.3 per cent to reach a record high of 194.0 points in the quarter.

This is despite the various cooling measures in place since 2010.

Even post the Additional Buyer’s Stamp Duty (ABSD) imposed in December last year, this has not deterred foreigners from buying properties.

Fuelling demand are low interest rates, high liquidity and Singapore’s reputation as a safe investment haven.

Revised loan quantum causing Singaporeans to invest elsewhere

With the loan quantum now reduced to 40 per cent for those wanting to buy a second property, some Singaporeans and expatriates are heading across the causeway where property prices are still affordable.

“The new reduced loan guidelines mean that my option is reduced. I will have to be more selective in my property buying option,” said Jace Moore.

In addition, Moore got as much as 80 per cent loan.

Moore recently bought a condominium unit in Nusajaya, Iskandar Malaysia, just 15 minutes drive away from the Second Link.

“The reason why I bought a unit at Impiana Nusajaya Resort Apartments is because the entire area complements each other. Nusajaya, as a whole concept, is very attractive. You are moving into a village which is self-sufficient, with EduCity, Medini Financial District and LEGOLAND MALAYSIA. You do not get that in other areas,” he said.

By 2018, Nusjaya will enjoy enhanced connectivity to Singapore once the Rapid Transit System (RTS) is in operation by 2018.

This article was first published in Property Buyer

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