Monday, December 15, 2008

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Bank Loans for Property see Credit Crunch

Financial institutions are not admitting to it, but they appear to have turned shy in granting loans, especially for property and motor vehicles, some observers say.

‘We do feel they are a shade conservative now. It used to be easy if you wanted to buy a second property,’ said Mr Eugene Lim, associate director of real estate firm ERA Asia-Pacific.

Banks pay more attention to stability of income for loans assessment

‘Now, they actually pay more attention to the buyer - like the stability of his income, whether the household is one or dual income,’ he said.

Mortgage take longer to be approved

Property loans, which used to take three days to be approved, may now take a week, noted MrReeve Ho, senior vice-president of property firm HSR International.

There is now more to-ing and fro-ing in processing loans too, he observed.

‘In the past, they would give the nod if all the documents were in order. Now, even with all the documents in order, they may grant a smaller loan,’ he said.

Banks grant mortgage only 60%-70%, instead of 90%

The Monetary Authority of Singapore (MAS) allows a home buyer to take a loan of up to 90% of the home’s purchase price or valuation, whichever is lower.

But banks are granting 60%-70% of the price, said those in the property business.

ERA’s Mr Lim added that a salaried applicant with not more than one property, and hence less likely to be a speculator or to be overstretched, would find it easier to get a loan than someone whose income is commission-based.

DBS, OCBC, UOB and Citibank say no credit tightening

But banks such as DBS, OCBC, UOB and Citibank insisted that it is business as usual and they have not tightened credit.

‘Our prudent consumer credit assessment process helps us evaluate the applicant’s ability to service a credit facility such as a car or housing loan, regardless of market conditions,’ said a UOB spokesman.

‘These credit facilities should never become a financial burden to our customers, in good or bad times. Customers with good credit records and stable income should not face problems getting a credit facility from us.’

Citibank said it continues to see steady growth for its credit card and personal credit line, Ready Credit, applications.

‘While we are cognisant of the environment, we make every credit line assignment tailored to the individual customer’s situation.

‘We continue to use rigorous credit criteria which take into account credit history, sources of income and employment status, among others,’ said Mr John Denhof, its business director for credit payment products.

Extract:Sunday Times, 14 Dec 2008

May also want to read:
99 Leasehold Property: Calculation of Depreciation Rate based on Singapore Land Authority Data
Spore Property History 1960-2008
Property Investment Tip: Don't put all your eggs in one basket
HDB Resale Price Index 1990-2008: Graph & Chart


Anonymous said...

Years of easy credit (hence speculative bubble) clashing with the oncoming supply glut and the world's worst recession in decades must surely be getting MAS worried.

Its the banking sector they are more concerned to protect. I wouldn't be surprised if, behind closed doors, they told banks to wise up with making risky loans.

Since so much of the private market sales was speculative, the raising of credit standards should further curtail speculative demand and imprudent purchases.

Anonymous said...

Be discerning and careful.
Dont rush and commit on such a big financial sum when people and companies are dying to deleverage.
It is a falling knife. Similiar MADOFF's madness have just began. More shocking corporate failures and scandals/frauds will surface not forgetting problems on the economic front. Singapore property have not the impact on all these news. Do you think Singapore property are so special to be decoupled when other major or global cities in the world have already corrected meaningfully?

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