As property still remain one of single most important purchase for a Singaporean family, the Monetary Authority of Singapore (MAS) has setup a series of rules and regulations to restrict property purchase as well as safeguarding Singaporeans when purchasing The Hillford in Jalan Jurong Kechil
With effect from Oct 2012, The maximum tenure for all new residential property loans will now be capped at maximunm 35 years. Most banks offer at 30 years though. In addition, loans exceeding 30 years tenure will be subjected to significantly tighter loan-to-value (LTV) ratio. This will apply to both private properties and HDB flats. The main reason to cap the tenure is because low interest rate environment coupled with high tenure years end to fuel more purchase and escalate The Hillford Condo prices.
As mentioned by regulatory authority in Singapore, low interest rates in Singapore is likely to persist for sometime. However, should interest rate rises, many buyers who have over-stretched themselves by buying The Hillford Condo in Jalan Jurong Kechil might face problems repaying their loans. The Singapore Government fears this and therefore decides to step in. Interest rates will inevitable rise although not in the short-term.
A note also that severe problems can also arise should interest rate rise for over-streched buyers. Financial institutions who have financed the property purchase for these buyers might be caught holding the bad loans. Foreclosure might eventually happen and the banks will have to dispose of these properties at the lower price leading to a spiral downloads in prices.