Impact of TDSR felt more by Singaporeans than foreigners

Posted by Sean Lim on May 19, 2017

It has been 3 months since the announcement of the Total Debt Servicing Ratio (TDSR) framework on property financing in Singapore. The TDSR impact seemed to be larger on Singaporeans than foreign purchasers, based on the bigger drop of Singaporean buyers.

According to the Business Times report, local buyers shrunk by 51% since TDSR was launched. Foreigners dropped by 39.1% and PRs by 44%.

Comparatively, ABSD seemed to have a larger impact on foreign buyers than TDSR. This could be due to this group having access to financing outside Singapore. For Singaporeans, it's noted by some industry players that they are affected by the collective measures, rather than any single one. There were some creative approaches to purchase property such as having borrower as guarantor or purchasing a unit using names who do not own any. Closing these loopholes have  resulted in a lower volume secondary market.

We have written many articles and given opinions on the effects of TDSR. Some buyers had to withdrawn and in some cases, lose the booking fees, as they could not obtain financing. For others who could still afford, they had to either cough out a bigger downpayment or pledge funds, in order to meet the TDSR threshold of 60%. Another significant component is the Mortgage Servicing Ratio which is applicable to HDB purchasers. It stands at 30% currently. Buyers can only use maximum 30% of gross monthly income to service the monthly installments based on loan tenure (capped at 25 years or age 65, whichever is earlier), 3.5% medium-term interest rate. We think this is much more severe given the price-sensitive segment of HDB purchasers. If you are the employer, our article on how TDSR affects self-employed should be handy.

So what should you do? You can do a self-assessment with this TDSR calculator. Have a go at it, and when ready, start comparing rates here.

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Topics: TDSR

Written by Sean Lim

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