Under the new regulations, a borrower’s Total Debt Servicing Ratio (TDSR) cannot exceed 60%. This means that a borrower’s total debt obligations (including property loan) must not exceed 60% of his/her gross monthly income. A standardised method of calculating TDSR and borrower income has also been established, with only 70% of the borrower’s variable, bonus and rental income being recognised.
The MAS ruling is aimed at discouraging people from over-stretching their finances to buy second or even third properties as investments. This is the latest ruling in a series of property cooling measures that the Singapore government has been implementing in an effort to dampen the property market.
The impact of this latest measure is expected to be small, due to the average Total Debt Servicing Ratio of banks in Singapore ranging from 40 to 50% prior to the new ruling. However, the cooling measures have managed to curb growth in resale property prices, as well as the demand for private properties in the central region. Instead, many buyers are flocking to new suburban developments such as J Gateway at Jurong East MRT, which saw all of its 738 units snapped up in the same weekend as the new ruling on housing loans.
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