TDSR may have hit HDB upgraders more The total debt servicing ratio (TDSR) framework appears to have made a bigger dent on purchases of private homes by those with HDB addresses than by those with private addresses, according to a caveats analysis. The TDSR framework, which requires financial institutions that grant property loans to take into consideration borrowers total debt servicing obligations, took effect in late June. In Q3 this year, those living in HDB flats picked up 1,574 private homes - a drop of about 52 per cent from the 3,303 units they bought in Q2. This was a bigger percentage slide than the 46 per cent fall in purchases by those with private addresses to 2,102 in Q3. As a result, the share of HDB dwellers among private home buyers declined from 46 per cent in Q2 to 43 per cent in Q3. Conversely, those with private addresses saw their share go up from 54 per cent to 57 per cent. However, for the first nine months, HDB flat dwellers share of private home purchases was 44 per cent, unchanged from 2012. Analysts stress that not all those with HDB addresses who buy a private home are necessarily HDB upgraders. In some cases, they may be acquiring a small private apartment as an investment, for rental income. However, among the ranks of HDB upgraders, the purchase of private homes may be hit by the TDSR rules because those who do qualify to buy a unit in a new executive condo (a public-private housing hybrid) project will consider an EC more favourably over buying a private home because, firstly, it is less stringent on borrowing. An upgraders existing HDB monthly mortgage payment will not be factored into TDSR calculations when a bank assesses the amount of loan to grant him for a EC unit he buys directly from a developer - since current rules require such a buyer to sell his HDB flat within six months of the EC projects completion. On the other hand, if an HDB upgrader were to buy a private condo, the monthly mortgage payments on both his existing HDB flat and the new condo purchase will be counted as part of monthly total debt repayments, which must not exceed 60 per cent of a borrowers gross monthly income under the TDSR framework. A monthly household income cap of $12,000 is set on those buying an EC unit from a developer. Source: Business Times –25 October 2013
Posted on: Sat, 26 Oct 2013 07:17:42 +0000
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