Singapore will restrict home-loan maturities to 35 years in a bid to curb a price bubble after property prices in the island-state rose to a record last quarter.
The maximum tenure for new residential property loans will be capped at 35 years, The Monetary Authority of Singapore said in an e-mailed statement today. It will also impose tighter loan-to-value limits for loans exceeding 30 years, it said. The rules, which will become effective Oct. 6, will apply to both private properties and Housing Development Board flats.
“The new rules aim to curb continued upward pressure on residential property prices, driven by low interest rates and rapid credit growth,” the island-state’s central bank said in the statement. “The eventual correction could be painful to borrowers and destabilize the economy.”
The government has been trying to rein in residential property prices since 2009. It has barred interest-only loans for some housing projects, stopped allowing developers to absorb interest payments, imposed additional taxes on foreigners and companies buying properties, and moved to curb the increasing trend of so-called shoebox apartments.
Banks in Singapore have been offering home loans with tenures of as long as 50 years. Low interest rates are likely to persist for some time and will continue to spur demand in the residential property market, pushing up prices beyond sustainable levels, the central bank said in today’s statement.
SHOEBOX APARTMENTS
In September, Singapore said it would cap the number of homes that can be developed in suburban projects to curb the increasing trend of what have been dubbed shoebox apartments, or apartments smaller than 50 square meters (538 square feet).
The island-state in December imposed an additional 10% stamp duty on foreigners and corporate entities. The extra levy is 3% for permanent residents purchasing a second home and for citizens buying their third residential property.
The government earlier imposed a 1% duty on the first $180,000 of the property price, 2% on the next $180,000 and 3% for the remainder.
Singapore home prices climbed to a record in the third quarter after developers sold more homes. The island-state’s private residential property price index rose 0.5% to 208 points in the three months ended Sept. 30, according to preliminary estimates released by the Urban Redevelopment Authority on Oct. 1. The index advanced 0.4% in the previous quarter, which was also at a record.
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