New Loan-to-Value Limits (LTV) w.e.f. 6th July 2018 Part 2 of Government’s Cooling Measure in July 2018

Why was there a sudden sale of 1,000 units at three projects (Park Colonial, Stirling Residences, and Riverfront Residences) in just a few hours right after the news release on Thursday night?

Firstly, we ought to know that the developers for these 3 projects actually broke the typical pre-launch sales ballot schedule and went ahead with the launch on the very night selling units via a first come first serve basis.

But why are the buyers are flocking over to the show flat?

Apart from the increment in the ABSD (discussed in the previous post) placed on any property purchase (for foreigners and corporate entities) and on the second or subsequente property purchase (for Singaporeans and PRs), there was another measure which the government had implemented.

And this impact all buyers (regardless of how many properties you owned and your citizenship status) who are taking a loan from the banks (Please ignore this if you are taking a HDB loan) to finance their property purchase.

So what is it?

The government actually tighten the Loan-to-Value Limits (LTV) by a 5%. This is actually a deal breaker to many interested buyers who had previously done their financial calculations based on the higher LTV. They would need to take action immediately by joining the queue on that very night in order to ensure that they can proceed as planned to purchase these units.

Take note that a reduction in 5% for a $1 Million property will mean that the owner will need to fork out an extra $50,000 cash.

If you as a buyer is already planning to use this $50,000 cash to pay for other big-ticket items such as kid’s uni fees, holiday or car, the most straightforward action would be to sign the OTP right away before the new measure get implemented the next day!

However, for the buyers who are still on the fence, these two scenarios may happen:

  1. You will be staying put and wonder how the market will react. It might be a good chance to see a drop in the prices since buyers can now borrow lesser and sellers may need to lower the prices to keep the properties more affordable.
  2. You will rush to purchase the properties available as you may not want to waste more time saving up with the lower LTV implemented.

No matter which route, I am pretty sure that the government is doing what is needed to ensure that the property prices move appropriately. Sad to say, it is not a 100% free market in Singapore but there could be more “good” than “bad” in the long run.




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