According to the Monetary Authority of Singapore, 1 in 10 borrows are overstretched in their property mortgages and are considered high risk borrowers. Amid low interest rate as well as increasing home prices, investors in Singapore are borrowing more to finance their property purchase.
High Risk Borrowers
The data collated from MAS indicated that 5-10 percent of borrowers here have taken too much debt to buy a house. Although the exact framework is on how MAS have arrived at this conclusion is unknown, it comes as no surprise borrowing cost is at record low due to the low global interest rate. The MAS has noted that should interest rate rise 3-4 percent, the percentage of at risk borrowers might increase to 10-15 percent.
It is also noted that should interest rates rise and property prices fall, this will post significant risk to the Singapore real estate sector as well as to high risk borrowers. It is also noted that banking loans in Singapore has risen by 18 percent in the last 3 years and home loans has become a significant part of our GDP. The ratio has risen from 35% to 46%. The start increase in GDP due to the increase in loans have sparked an alarm to many economist in banks who are concerned about how the rise in interest rates can led to defaults to high risk borrowers.
High Risk borrowers could default
This has prompt the Monetary Authority of Singapore to issue a circular as well as the TDSR framework to reduce the amount of debt to borrowers and to reduce debt as a whole.
Riverbank Condo at Fernvale is launching soon. There should be less risk in this development as the quantum is low and buyers do not need to borrow a lot to finance this property purchase.