Tuesday, November 20, 2012

Boost expected for lower-priced homes: report

The latest restrictions on home loan tenures will likely boost demand for lower-priced non-landed private homes, or those under S$1.5 million, according to a report by Knight Frank.


The cooling measures are expected to impact affordability. For instance, a 35-year old home buyer with a S$12,000 monthly income can now afford a home priced as much as S$1.5 million to S$1.6 million on a 30-year loan, assuming a 35 percent debt-servicing ratio.


Meanwhile, a 40-year old home buyer with the same monthly income can afford a home costing between S$1.3 million to S$1.4 million with a 25-year loan under the regulations, reported The Straits Times.


This sixth round of cooling measures introduced last month are aimed at preventing an overextension of home loans by more than 35 years or over the retirement age of 65.


The previous 80 percent loan for a first mortgage is now cut to 60 percent while borrowing ceilings have dropped to 40 percent for second and subsequent mortgages.


“Any potential lower demand coupled with ample upcoming supply of new homes will put downward pressure on residential property prices,” said Knight Frank. Moreover, a marginal increase in overall prices of around 0.1 to 0.3 percent will likely occur in the last quarter of 2012.


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