Singapore rushes to save banks amid property rules easing

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Bloomberg on Friday said banks has been given a reprieve with the easing of the country’s property rules, following a rise in housing loans share in the bad debts ratio.

OCBC alone showed housing loans consisted 15% of its bad debts ratio, and make up a little less than 19 percent of soured loans at United Overseas Bank Ltd.

Property is the collateral in 37 percent of secured nonperforming assets reported by DBS Group Holdings Ltd, said the news portal.

The relaxation of the rules came after 13 consecutive quarters of drops in Singapore home prices.

The curb on property saw home prices fell 3 percent last year.

“The island’s three homegrown banks were starting to look threatened, just as they struggled with outsized losses on loans to domestic rig-builders and corporate borrowers in Singapore, Hong Kong and China,” said Bloomberg.

The rules on property curbs were also revised after regulators noted that the country’s property market had been quite weak for some time.

The move is also intended to prepare the country’s property market for the next US FED move, while the Singaporean government is trying to prop up the market.

It also took into consideration that some categories of home owners were not able to raise capital from their properties, saying the Total Debt Servicing Ratio or TDSR framework has limited their flexibility to monetise their properties in their retirement years.

A statement from regulators also said some borrowers have given feedback that the TDSR framework limited their flexibility to monetisation of their properties, that is to borrow against the value of their properties to obtain additional cash.

The Monetary Authority of Singapore (MAS) said it will, therefore, relax the rules to meet such needs.

The roll back of some property-market curbs – imposed to cool off home prices that started in 2009 – came after a three-year decline in prices that made homes more affordable in the city-state.

Bloomberg said shares of property developers surged after the surprise announcement by the government Friday that stamp duty imposed on sellers will be reduced and some mortgage restrictions eased.

City Developments Ltd. jumped as much as 10 percent and CapitaLand Ltd. climbed to the highest in almost two years.

Sellers’ stamp duty, currently payable on residential properties sold with four years of being purchased, will now only apply for three years

The rate of duty will also be lowered, to 4 percent for properties sold in the third year, to a maximum of 12 percent for dwellings sold within one year.