THE Government's latest move to tighten borrowing rules for property buyers could reduce sales here and push more investors to foreign property and smaller homes.
Analysts also said the policy shift might reflect a steeper rise in home prices in the second quarter than the first. Second-quarter flash estimates on home prices will be out on Monday.
The Monetary Authority of Singapore (MAS) said yesterday that banks have to use a standardised set of guidelines to assess property buyers' ability to borrow. This total debt servicing ratio (TDSR) framework applies to all property loans to individuals, the MAS said. It takes effect today.
"We think the TDSR framework is first and foremost, a measure aimed at ensuring financial stability, rather than at directly cooling property prices - although there will certainly be an impact," Barclays economist Joey Chew said yesterday.
"Investors who were intending to enter the property market now to lock in a low rate of interest may be thwarted, particularly if they are already highly leveraged," she added.
HSR special adviser Donald Han said the impact of the MAS move would be most felt by those buying their second or subsequent properties, and home buyers may turn to smaller homes with cheaper overall prices.
"There will be a slowdown in demand... But it's like trying to stop the tide. The money will have to go somewhere," he told The Straits Times.
Mr Han reckons that sales volumes could drop by 10 per cent to 20 per cent over next month and August, but residential prices are unlikely to be hit. "Developers have strong enough balance sheets to hold their stock for longer than that," he said.
Property investor Michelle Ang, 37, a corporate treasurer in a multinational corporation, told The Straits Times yesterday that she may now look overseas for future property investments.