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Source:
www.gov.sg |
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Excerpt of MINISTERIAL
STATEMENT ON POLICY CHANGES AFFECTING THE PROPERTY MARKET |
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Highlights of Changes |
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increase the housing
financing limit to 90% of the property value |
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lower the cash
payment for private residential properties from 10% to 5% |
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allow CPF members to
use their CPF savings to purchase private residential properties
with remaining leases of 30 to 60 years |
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allow non-related singles to use
their CPF savings to jointly purchase private residential
properties |
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phase out the
Non-Residential Properties Scheme (NRPS) by 1 Jul 2006 |
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allow foreigners to
purchase apartments in non-condominium developments of less than
6 levels without the need to obtain prior approval |
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I will now proceed to elaborate on the
measures that will be put in place in the next few months. |
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Details of these policy measures will be
provided by the respective Government agencies separately. |
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Raise LTV limit for housing loans from
80% to 90% |
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The first of these measures is the raising
of the Loan-to-Value (LTV) limit for housing loans. MAS introduced the
80% LTV limit for bank-originated housing loans in 1996, together with
the Government¡¯s package of measures to cool the private property
market. |
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The 80% LTV limit was intended not only to
counter the market overheating at the time, but to ensure sound bank
lending practices across property market cycles. |
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The 20% payment by borrowers provided a
buffer for banks in the event of a property downturn. This was
particularly important as bank loans at the time ranked second behind
borrowers¡¯ own CPF claims on mortgaged properties. |
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In 2002, the priority of claims over
properties was changed so that banks now held the first charge for the
property ahead of CPF. It has been three years since, and the market has
had sufficient time to adjust to this change. |
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Currently, over two-thirds of banks¡¯
outstanding housing loans are secured by first claims over properties. |
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MAS is now ready to increase the
housing financing limit to 90% of the property value. The
remaining 10% which the purchaser has to pay will continue to deter
over-borrowing by purchasers and minimize potential losses by banks
arising from borrower default. |
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However, to mitigate the increased risk that
banks will take, MAS will require banks to hold more capital against
housing loans which exceed 80% of the property value. MAS will also
expect banks to apply rigorous internal credit evaluation criteria
before extending high LTV loans. |
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In some countries, mortgage insurance is
available to insure lenders against the risks of high LTV loans. |
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MAS is prepared in-principle to consider
mortgage insurance as an alternative to the capital charge to mitigate
the risks of high LTV loans. However, mortgage insurance is not yet
available in Singapore. MAS will be studying its viability here and how
best to regulate mortgage insurers. |
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HDB will similarly raise the
loan limit for its flat buyers from 80% to 90%. The actual loans
to be granted will be subject to the banks¡¯ and HDB¡¯s credit assessment
and mortgage financing policies. |
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Limit minimum cash payment required for
residential properties at 5% |
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Another revision to the housing loan rules
in 2002 was the reduction of the cash payment for private residential
properties to 10% of its value, down from 20% previously. |
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The Government will now lower
the cash payment for private residential properties from 10% to 5%.
This means that a purchaser who is granted a 90% loan for his housing
unit can pay his remaining 10% through a combination of at least 5% of
the property value in cash, and the remaining with CPF. |
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For HDB flats financed with bank loans, the
payment to be paid in cash is currently 4% and is slated to increase
gradually to 10% in 2008. |
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In line with the reduction in the cash
payment for private residential properties to 5%, the Government will
adjust the cash requirement for HDB flats financed with bank loans to
5%, instead of to 10% as initially planned. |
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The raising of the LTV limit will take
immediate effect and apply to all properties purchased from today. The
5% cash requirement for private properties will take immediate effect,
while that for HDB flats will apply to flats purchased from 1 Jan 2006. |
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These changes will give consumers a wider
choice of financing options when purchasing a property. However, I urge
property buyers to continue to exercise prudence in their home purchase
and financing decisions, and ensure that they can comfortably afford the
expenses. |
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More..... |
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Source:
www.gov.sg Media Release 19 Jul 2005 |
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Full
Text of Speech |
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Policy changes affecting the property market
