Debated in Parliament on 3 Nov 2020.
Mr Saktiandi Supaat asked the Minister for National Development (a) what is driving the recent demand for landed and private properties in Singapore; (b) how are banks scrutinising the loan applicants under the current economic climate; and (c) whether there is a risk of a property bubble with the current market demand.
The transaction volume of private residential properties has increased following the reopening of sales galleries and home viewings post Circuit-Breaker. Our assessment is that this reflects pent-up demand, supported by the current accommodative interest rate environment.
Overall, private housing prices have remained broadly stable, rising marginally by 0.1% in the first three quarters of the year. The earlier rounds of cooling measures have moderated the property market cycles, and brought prices more in line with economic fundamentals.
MAS also has in place macroprudential measures, such as the total debt servicing ratio (TDSR) and loan-to-value limits, to protect households from over-extending themselves when taking out residential property loans. For instance, the TDSR framework anticipates potential volatility in an individual’s income by imposing a 30% haircut on variable income, and accounts for future interest rate increases by applying a higher medium term loan interest rate of 3.5% to compute monthly residential property loan instalments.
In processing new mortgage applications, banks are expected to continue to maintain sound credit underwriting standards and prudent lending practices, especially in the current economic environment. Banks are mindful that an individual’s income could become more uncertain during this period and will take that into account when assessing potential borrowers.
All prospective buyers should carefully consider their ability to service their mortgage obligations over many years, and not be attracted by low interest rates in the short term. Given the labour market uncertainties in the current economic situation, prospective buyers should remain prudent in their property purchase and financing decisions. The Government will continue to monitor the property market closely, and will adjust our policies where necessary to maintain a stable and sustainable property market.
PAPERCUTS