TDSR one year on
It's been almost a year since the government implemented the Total Debt Servicing Ratio or TDSR framework and data from Urban Redevelopment Authority shows that it has been effective in cooling the property market.
The number of new private homes sold after TDSR was introduced has dropped by more than half, compared to the same period before it was implemented.
The TDSR framework was implemented on the 29th of June last year to ensure that individuals do not overstretch their abilities to repay their loans.
Under this framework, all financial institutions extending loans, including those of car loans, student loans and property loans, must ensure that that the total repayments mustn't exceed 60 per cent of the borrower's gross monthly income.
Industry watchers say TDSR also works as a measure to cool the property market.
Data from URA shows that the number of new private home sales had dropped by more than half after TDSR was introduced, to some 9,100 units as compared to about 18,800 units in the same period a year before the framework started.
Prices also saw a moderate downward shift.
The quarterly index from URA showed that prices of new private homes edged up a slight 0.4 per cent in the immediate quarter after TDSR was implemented.
But, it started seeing a decline from the fourth quarter of last year when prices slid 0.9 per cent, which was the first such drop since the first quarter of 2012.
And, prices fell another 1.3 per cent in the first quarter of this year.
Over in the private residential resale market, the impact of the TDSR was also felt.
CBRE's numbers showed that sales volume in the secondary market dropped by 50 per cent in the first half of this year, compared to the same period last year.
Analysts say that the decline in both categories shows the effectiveness of TDSR.
Ku Swee Yong is Century 21's Chief Executive.
"The TDSR was introduced to stamp the rise in prices and so it has definitely done its job. In the last four quarters, we've seen every quarter the overall price index dipping slightly. This is actually an ideal and stable situation which the government has been trying to achieve."
Head of Research at CBRE, Desmond Sim, agrees.
"Since the introduction in June 2013, there is definitely a significant impact. Our view is that the TDSR is one of the most effective measures for all, it's all encompassing. It targets the individual instead of any specific sector per se."
Meanwhile, Century 21's Mr Ku says perhaps it's time to ease some of the cooling measures which have been introduced over the last five years.
"I'm not calling for a complete removal but definitely a relaxation and a tweaking of TDSR's very tight borrowing rules versus a tweaking of the Additional Buyer Stamp Duty and the Seller Stamp Duty given that today we hardly see evidence of investors who could be considered speculators in the market."
By Gwen Goh
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