Loan curbs target rising rates, but other dangers lurk

Loan curbs target rising rates, but other dangers lurk

SINGAPORE - Another carefully targeted missile to expunge certain buyers from the property market was launched last Friday.

The Monetary Authority of Singapore (MAS) trained its latest measure on one specific class of real estate investors: those spending too much of their monthly pay packet paying off their debts.

The weapon was a new lending framework that capped how much property buyers can borrow to finance their purchases if they are already significantly in debt. They will be restricted to loans where monthly repayments, combined with all their other debt obligations, do not exceed 60 per cent of their gross monthly income.

But the MAS was quick to stress that this move was not yet another cooling measure - there have been seven rounds since 2009 - to deflate housing prices.

The strategy this time is a bit different from the previous curbs.

For one thing, it is meant as a permanent framework to standardise lending practices, in contrast to recent steps that were highlighted as temporary actions to tame runaway prices.

Unlike earlier measures, Friday's manoeuvre also included no tactics to directly check demand such as raising or extending additional taxes on home buyers and sellers.

What this shows is that the MAS is becoming more concerned about affordability - not so much for first-time buyers deterred by soaring prices as for investors piling on debt to buy rental property.

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