Monday, October 8, 2012

Chart of the Day: Here's why you've got nothing to worry about the new property measures

Affordability ratio remains at 27-29% even if loan tenures are capped at 30 years.

The Monetary Authority of Singapore (MAS) announced on Friday that it would be capping the tenure of residential property loans granted by financial institutions at 35 years.

Here's what CIMB thinks:

We had expected new property measures in light of QE3. Other regional governments such as China and HK have already made their moves. We believe this move is preemptive in nature and alone is unlikely to hurt demand much.

There have been recent cases of banks dishing out loans for longer than 35 years. MAS estimates that more than 45% of new residential property loans exceed 30 years, with average tenures up from 25 years to 29 years in the past three years.

Given low mortgage rates (1-1.5%) and the demand for smaller units, we estimate that the mortgage to income ratio remains comfortable at 27-29% even if loan tenures are capped at 30 years. Of greater significance is the policy makers’ intention to intervene if physical prices remain elevated.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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