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Country tightens housing loan rates; citizens unable to afford properties!

In response to an increase in interest rates, Singapore has announced a package of measures for the housing sector, including additional methods to control demand as well as tighter lending limits for house loans. The measure would ensure ‘prudent borrowing’ and ‘prevent future challenges’ in servicing home loans, according to a joint statement released late on Thursday by Singapore’s central bank, the Ministry of National Development, and the Housing & Development Board.

The restrictions, which included reducing government loans available to purchase public housing by 5 percentage points, were announced late on Thursday and went into effect on Friday. The amount of financing a person can acquire in relation to their income level when purchasing from either the public or private property market has decreased due to the increase in the interest rate floor utilised in bank loan calculations.

The actions should ‘dampen any enthusiasm and curb the speed of price increase, ‘according to OCBC analyst Selena Ling. Foreign investors would be less affected by the measures since they are better aware of the state of the world’s interest rates or are less reliant on loans, according to Ling. According to Christine Sun, senior vice president of research & analytics at OrangeTee & Tie, the ‘overheated’ resale public housing market is the major aim of the new regulations.

Analysts anticipate that the measures will stifle the increase in home prices in the fourth quarter. Record numbers of Singapore public housing apartments were reportedly sold for more than S$1 million ($697,739), according to Reuters. The government put in place a sizable package of cooling measures in December of last year, but public housing prices continued to rise with a ‘clear upward momentum,’ rising by more than 5% since then until the end of the second quarter of this year, according to the authorities.

Private home prices had a 3.5% gain in the second quarter, which is five times the 0.7% increase in the first. Because of COVID-19-related construction delays and a consequent shortage of new units, apartment prices in Singapore, where real estate is valued as a safe haven investment, have increased. Interest rates have increased dramatically and are probably going to increase higher, according to the authorities’ announcement from Thursday.

‘We advise households to take caution before taking on any additional loans and to be certain of their ability to pay off debt before entering into long-term financial arrangements’. The share prices of prominent Singaporean developers, including City Developments (CTDM.SI), GuocoLand (GUOC.SI), and Frasers Property (FRPL.SI), declined by more than 1.5% on Friday as a result of the new regulations, as opposed to a 0.4% decline in the overall market.

In order to combat inflation, many central banks around the world raised interest rates. Commercial banks in Singapore set the interest rates on bank mortgages. Recent weeks have seen the temporary removal of fixed-rate mortgages by three local banks. The central bank of Singapore is expected to tighten policy at its planned review next month because Singapore’s monthly inflation rate has stayed high in recent months.


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