For the property buyers, it’s been one bad news after another with more and more regulations. One more bizarre than the other.
After I pointed out that an average couple may not be able get a loan for a HDB but can qualify for a higher quantum for Executive Condominium (EC) and Condominiums (http://www.icompareloan.com/resources/anomaly-young-couple-cannot-afford-hdb-but-can-afford-condominium/), a new regulation is imposed.
09 Dec 2013 – MND – Refining the Executive Condo housing scheme (link) – MSR cap of 30% to apply to EC. (Effective with OTP on 10th Dec 2013)
We welcome MND’s refining of the regulations. However what has happened is, MND slapped the Monthly servicing ratio (or Mortgage servicing ratio) of 30% on the Executive Condominium as well. What this means is, a couple buying the EC will have to meet both the criteria of: –
- MSR less than or equal to 30% and;
- Total Debt Servicing Ratio (TDSR) less than or equal to 60%.
On top of that, new Executive condominiums have an upper income cap of $12,000 a month. (Source: HDB, http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyingNewFlatEC?OpenDocument#IncomeCeiling)
What this means is, in order to meet the MSR <= 30%, the selling price has to be about or less than $880,000. Else a couple’s salary will not be sufficient. This effectively killed off the developer’s chances of marketing the property above $880,000.
Hence the future land use is bound to be more optimum with Singapore citizens and Permanent residents staying in ever smaller housing units. So there is only one way for the property to go, units will get smaller and smaller.
10 Feb 2014 – MAS broadens exemptions from TDSR thresholds
This is a welcome news. This shows that MAS really value feedback. However, the policy is again fraught with ambiguity as many banks we spoke to are not sure how much “exemptions” they are allowed to do. For investment properties, they can waive TDSR to be coupled with a debt reduction plan. However there was no mention of what kind of debt reduction. This goes to show that MAS still has some room for improvement where it involves industry consultation, such as involving the stakeholders such as banks for implementation feedback.