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Mortgage loan demand falls 65%: Study

This article is more than 12 months old

Reasons include property cooling measures

Mortgage demand is flagging as private home buyers turned cautious in the wake of the July 6 cooling measures, tighter financing requirements and higher financing costs in a rising interest rate environment.

A study by the Credit Bureau Singapore (CBS) found new mortgage loan applications plunged 64.9 per cent in December from July last year to 4,423 new applications, and were down 54 per cent from a year ago.

According to data provided by CBS, the number of new loan applications were 12,619 in July, and fell to 8,100 in August.

"With the drop in mortgage loan applications, we note the measures put in place have exhibited seasonal fluctuations in the housing market and slower take-up rates for new launches," a CBS spokesman said.

Analysts cited slowing developers' sales of new homes, excluding executive condominiums (ECs), with the latest Urban Redevelopment Authority data showing a 16.8 per cent drop from 2017, to 8,795 last year.

Cooling measures that took effect on July 6 last year saw the additional buyer's stamp duty (ABSD) raised and loan-to-value limits tightened.

The ABSD rates for Singaporeans and permanent residents buying their second and subsequent residential property were raised by 5 percentage points for all individuals and 10 percentage points for entities.

Loan-to-value limits were tightened by 5 percentage points for all housing loans granted by financial institutions.

"The current en bloc cycle has not translated to additional new home sales. It isn't unusual because the overall market conditions are not as favourable due to the loan restrictions, cooling measures and weak rentals," said International Property Advisor chief executive Ku Swee Yong.

"Deleveraging is good especially in light of growing uncertainty and risks in the face of the upcoming Indonesian and Thai elections, Brexit and the ongoing trade war."

Ms Ong Choon Fah of Edmund Tie & Company said: "After the Chinese New Year holidays, there will be more launches and there should be a pick-up in buying."

The CBS study also showed that 60,746 buyers held more than one mortgage loan in November last year.

This represents a 4.5 per cent drop from 63,585 buyers in July 2018 and a 6.1 per cent decrease from 64,680 buyers holding more than one mortgage loan in November 2017.