Cooling measures for multiple properties starting to bite

The proportion of private housing loan applicants without any outstanding mortgages continued to rise in the first quarter of this year, according to latest figures from Credit Bureau (Singapore). This suggests that the January cooling package, with measures that discouraged multiple property ownership, is starting to bite, analysts say.

CBS data shows that of the 16,208 Singaporeans and permanent residents granted private home mortgages (including refinancing cases) in the first three months of 2013, 65 per cent did not have any outstanding home loans either for an HDB flat or private home.


This figure is markedly higher than the 61 per cent for the whole of last year, which in turn was up from 56.4 per cent in 2011 and 53 per cent in 2010. On the other hand, the proportion of second and third loan cases among Singaporeans and PRs granted private housing loans has been falling. The 65 per cent share of first-loan cases in Q1 2013 is up nearly 7 percentage points from the 58.3 per cent in Q1 2012. OCBC Bank's head of consumer secured lending Phang Lah Hwa said: "We observe that the number of home loan borrowers with only one home loan has increased in Q1 2013 compared to last year, as the series of property cooling measures have discouraged multiple property purchasers."

The rising proportion of first-loan cases is illustrated even more dramatically by a monthly breakdown of data by CBS. The share has risen from 59.4 per cent last December to 63.1 per cent in January 2013 (the month of the cooling measures), with the share continuing to rise to 64.4 per cent in February and 66.2 per cent in March. The March figure is the highest in at least three-and-a-quarter years.

Among the 1,392 non-PR foreigners granted private housing loans in Q1 2013, the proportion of first-loan cases was 79.6 per cent, up from 76.2 per cent for the whole of last year.

Most observers credit the government's property cooling measures for these trends. The latest package in January further lowered loan-to-value (LTV) limits for individuals with at least one outstanding home loan seeking subsequent home mortgages. Also, the move to extend additional buyer's stamp duty (ABSD) to the second residential property purchase for Singaporeans and the first purchase for PRs plus the hike in ABSD rates have curbed property investment. In turn, this has resulted in a higher proportion of first-loan cases.

However, industry watchers say that the higher share of first-loan cases is also due to the strategies of some property investors to get around the system. Some borrowers may have paid up their first home mortgage before buying a second property (to qualify for higher LTV of up to 80 per cent). Some parents also buy properties in their children's names.

Conveyancing lawyers and bankers also recount anecdotal evidence of "decoupling" the ownership of properties. This refers to couples who jointly own residential properties making a transfer to give full ownership to one spouse, and make their next purchase in the name of the other spouse. "So either way, the higher proportion of first-loan cases is due to the cooling measures," quipped a banker.

Since 2011, the government has announced a few rounds of measures to cool investment demand for residential properties.

Under CBS data, some borrowers, such as married couples, could be joint applicants for a single loan. Hence, there were 11,423 private home mortgages granted to Singaporeans and PRs in Q1 2013 but this translated to a higher 16,208 individual applicants for those loans granted. While bank loans for HDB flat purchases are excluded from the pool of applicants granted private home loans for the purpose of this study, the applicant's total home loan count covers bank loans for HDB flats as well as private homes (including ECs).

Also noteworthy is that CBS' data lumps together new home loan and refinancing cases, as currently there is no differentiation between new home loans and refinancing cases uploaded on its database. However some analysts reckon that including refinancing cases may not significantly affect the picture in terms of analysing borrowers' loan count - assuming that refinancing cases are driven by lower interest rates and not a borrower's loan count.

Source: Business Times –23 May 2013