EXCLUSIVE: Some Singaporean property investors are circumventing the Monetary Authority of Singapore (MAS) rules about how much they can spend to service their property loans by using offshore and developer financing.
A small number of local real estate agencies who specialise in overseas projects admitted they were hard hit following last year’s introduction of the Total Debt Service Ratio (TDSR), however in the months since the cooling measure was implemented, offshore finance organisations have been granting loans to Singaporean property buyers and investors who exceed the 60 percent TDSR limit for servicing their property and other loans.
Some overseas property developers have also started offering developer financing for Singaporean investors who are keen to invest but would otherwise have fallen foul of the MAS rules.
In the past few months PropertyGuru has witnessed offshore finance being offered to Singaporeans wanting to invest in overseas property, and print advertising promoting developer finance for overseas property purchases.
Anyone investing 60 percent of their disposable income servicing property and other loans is running a substantial risk if, and as many predict when, economic conditions become less favourable – both locally as well as elsewhere in the world.
Interest rates being offered overseas are also, in almost every case, substantially higher than those you would find in Singapore, yet finance houses do seem keen to capitalise on the local market restrictions and offer finance to local buyers and investors over and above the 60 percent MAS restrictions, despite the potential risks.
Hester, who declined to give her surname, who spoke to PropertyGuru at a weekend property exhibition in Singapore, admitted to spending up to 80 percent of her income on property.
“It’s my life,” she said. “I’ve been investing in overseas properties for more than 15 years and I like to think I’ve made all the mistakes possible, but at the same time I’ve made money and I want to make more.
“There are some fantastic opportunities right now, and given the slowdown in the local property market I feel overseas is the place to invest.
“The TDSR spooked me for a while, but then I realised I could still invest beyond the MAS limits because the restrictions only apply if you take local loans. I already have loans from overseas financial organisations, and because I’m known to them and I’ve got a good credit history they’re willing to lend.”
She added: “I don’t know how easy it would be for a new property investor who was already up to the 60 percent TDSR limit looking at overseas financing for the first time.”
PropertyGuru approached several Singapore real estate agencies to comment about the availability of offshore and developer finance for properties being offered at Singapore property exhibitions. None were willing to be quoted on the record however several admitted it was happening although not in a big way.
“Singaporeans are savvy when it comes to investing and money, and they’re generally not going to over-extend themselves,” said one Singapore real estate agent.
A spokesperson for the Monetary Authority of Singapore told PropertyGuru: “Banks in Singapore are required to comply with MAS’ property loan rules, including taking into consideration all monthly repayments of property and non-property debt obligations when computing the total debt servicing ratio of a borrower. They should not offer or propose arrangements to help borrowers circumvent the rules.
“Banks operating outside Singapore are subject to the laws and regulations of the jurisdiction in which they operate.
“Investors who purchase property and obtain financing for the purchase outside Singapore should consider the legal and regulatory framework governing their purchase and financing agreements, including the protection they can expect. They should also be mindful of other risks associated with cross-border property purchases, such as foreign exchange and interest rate risks.
The spokesperson added that the offer of financing by property developers for the purchase of overseas properties is not regulated by MAS.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
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