3 exceptional things about the latest home loans rule

Mortgage repayment may fall around 24-25% higher.

Here are Nomura's three distinctions of the latest round of measures announced by MAS on October 5:

• The latest measures were announced by the MAS and not the URA.
• Restrictions are imposed on first-time home-buyers for the first time.
• The slightly more hawkish tone (“we will do what it takes to cool the market” from previously “to promote a sustainable residential property market where prices move in line with economic fundamentals”).

Will the market still find its way around the new rules?
According to the MAS, “more than 45% of new residential property loans granted by financial institutions have tenures exceeding 30 years”.

Moreover, based on our estimates, unless home buyers have ample equity capital, mortgage repayment could now be 24-45% higher than before.

Theoretically, therefore, there should be some impact on housing demand from the latest measures. In reality however, we suspect the market will still find its way around the new rules.

Moreover, most of the purchases are done in the pre-sales market, which means the monthly mortgage service during the
construction period is still relatively low despite the new measures. The most likely outcome, in our view, is therefore a period of lower transaction volume for a month or two before activity starts to pick up again and the government has to think of new curbs, again. In short, we do not expect this to be the last we see of this cat-and-mouse chase.