Debated in Parliament on 11 May 2015.
Er Dr Lee Bee Wah asked the Prime Minister (a) whether the Ministry is aware of how many Singaporeans are invested as individual owners of properties in Iskandar Malaysia; and (b) how are our banks safeguarded against any major default in property loans to these buyers.
The Minister for Culture, Community and Youth and Second Minister for Communications and Information (Mr Lawrence Wong)(for the Prime Minister): Mdm Speaker, I am taking this question on behalf of Deputy Prime Minister Tharman
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Shanmugaratnam and the Chairman of the Monetary Authority of Singapore (MAS).
Madam, there are many risks involved in overseas property purchases, especially in markets where there is uncertainty of supply or no effective regulation of supply. If there is an over-supply of properties, investments can lose their value, and it will also be difficult to find tenants for an investment property.
In Iskandar and Johor, some reports have highlighted aggressive land-banking by developers. There is, indeed, a real concern about future over-supply in the property market there and, hence, the potential decline in value of homes. Based on data from Malaysia's National Property Information Centre, there are around 336,000 new private residential units in the pipeline. This is more than the total number of private homes in Singapore. So, everything that is coming through the pipeline, incoming and being planned, is already more than the total number of private homes in Singapore. The data do not include another 1,400 hectares of reclaimed land near the Tuas Second Link that will come on stream from 2020 onwards.
Given these indications, there are many reports that indicate that buyers are becoming more cautious. Official Malaysian data suggest that the Johor housing market is already slowing down, with the value of residential property transactions falling by 42% on a quarter-on-quarter basis in the fourth quarter of 2014. Singaporean buyers, too, are becoming wary. According to surveys of real estate agencies in Singapore, the number of Malaysian properties bought through these agencies dropped from 2,609 in 2013 to 838 in 2014.
Nevertheless, not all Singaporeans have recognised the risks involved in overseas property purchases. Hence, MAS and the Council of Estate Agents (CEA) will continue to step up efforts in raising awareness and highlighting these risks. For example, the CEA has issued guidelines on what investors in overseas properties should look out for. These include finding out about rules or restrictions on foreign property purchases and ownership, the taxes payable, and the dispute resolution avenues available in the foreign market. These are besides the risk of oversupply that I mentioned earlier, resulting in potential investment losses.
At the systemic level, financial institutions in Singapore do not have large exposures to loans for the purchase of overseas properties. In fact, the banks themselves are cautious about financing the purchase of overseas properties. Hence, such loans make up only 2% of the housing loan portfolios of the key mortgage lenders in Singapore. In addition, the Total Debt Servicing Ratio (TDSR) framework introduced by MAS in June 2013 requires lenders to assess the debt servicing ability of their customers for all new property loans, regardless of whether the property is in Singapore or overseas. All existing debt obligations, including
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those for overseas property purchases, must be included for such assessments.
MAS' stress tests on banks' housing loan portfolios indicate that the banks will remain sound even under stressed conditions.
Er Dr Lee Bee Wah.
Thank you, Mdm Speaker, and I thank the Minister for the answer. According to the feedback from my friends and residents, a lot of Singaporeans have gone overseas to buy properties because of the Additional Buyer's Stamp Duty imposed in Singapore, coupled with aggressive advertisements by foreign developers, including those from Iskandar Malaysia. I would like to ask the Minister: is there any possibility or review on lifting the Additional Buyer's Stamp Duty for Singaporeans?
Madam, we should look at this separately because we have a set of cooling measures which is put in place taking into account global conditions and our domestic property market. And we know why there is a need for that. It is really because, globally, interest rates are low, returns are low, there is a lot of liquidity in the market and investors everywhere, including in Singapore, are looking for things to invest in. If we are not careful, then you can easily have a bubble being built up, which is why we had to put in place cooling measures in our property market. In that context, whatever we do on the cooling measures has to take into consideration the broader global developments as well as our domestic property market trends and ensure that we continue to have a stable and sustainable property market within Singapore.
On the advertising standards which the hon Member talked about, that is something which we can and should look into. In fact, I understand that the Advertising Standards Authority of Singapore is already looking into reviewing their guidelines for advertising on investment in properties and the guidelines would apply to investments in property both locally as well as overseas. They are reviewing the guidelines and I think they will put in place a set of more stringent guidelines in future. What is important at the end of the day is that individuals must have the responsibility when they make these decisions, and we have to continue to raise the awareness of potential investors and educate them to make sure that they do sufficient due diligence before they make any property purchases, overseas in particular.
There are many risks. I have mentioned oversupply risks as one of the considerations. There are also foreign exchange risks which can move easily against the investors' favour. There are risks of changes to tax and regulatory frameworks governing property ownership. For example, there may be rules that restrict the non-residents' ability to sell a property in
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that country easily. And these are risks that can happen in any investment in overseas properties. These are risks that we must continually emphasise. The CEA and MAS, as I mentioned earlier, will step up their efforts to help investors understand these risks better and to do their due diligence.
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