Singaporeans went on massive property buying spree abroad in 2013: MAS

But many buyers are unaware of risks.

More Singaporeans are foraying into overseas property markets, but many of these buyers are unaware of the risks associated with their purchases. In a statement released yesterday, the Monetary Authority of Singapore issued warnings against overseas property purchases.

According to the MAS, the value of overseas purchases made through real estate agents in Singapore has grown to S$2.0 billion in 2013 from S$1.4 billion in 2012.

“MAS is concerned that some individuals may be overextending themselves through such investments, or may not recognise the risks involved. With global interest rates at very low levels, it is quite understandable that Singaporeans should want better returns than what bank deposits offer. But most local savers already own a property in Singapore, and have to be concerned about how much concentration they can afford to have in properties, especially when taking risks in overseas property markets,” the MAS cautioned.

Here’s more from the statement:

MAS has therefore issued warnings about overseas property purchases:

First, the risk of price fluctuations may be more difficult to assess or manage in overseas markets, which investors are likely to be less familiar with.

Second, there are foreign exchange and interest rate risks.

Third, the legal and regulatory framework governing property purchases and financing agreements in other countries may not provide the level of protection that investors are used to in Singapore.

The Council for Estate Agencies (CEA) has also been highlighting these risks. CEA issued an online guide in March 2014 on what investors in overseas properties should look out for. (These include finding out about rules or restrictions on foreign property purchases and ownership, the taxes payable, and the dispute resolution avenues available in the foreign market.)

To encourage financial prudence on the part of both borrowers and financial institutions (FIs), MAS’ Total Debt Servicing Ratio (TDSR) framework covers all loans taken from FIs in Singapore to finance property purchases, whether in Singapore or overseas.

When a borrower seeks a property loan, the FI is required to include in the TDSR all existing debt service obligations, including those relating to any foreign property purchases.