Even as property stocks fell across the board yesterday, following Friday night's announcement of a new Total Debt Servicing Ratio (TDSR), the dips were measured compared to market reaction following previous cooling measures.

The FTSE ST Real Estate Index dipped 5.67 points to close at 734.24 yesterday, led by counters such as UOL Group which lost 18 cents (2.68 per cent) to end trading at $6.54 and CapitaLand which dipped 7 cents (2.27 per cent) to close at $3.01. City Developments Limited (CDL) ‐ a proxy for Singapore's property market ‐ lost 17 cents (1.59 per cent) to end trading at $10.53. On the other hand, Wing Tai bucked the trend, gaining one cent (0.49 per cent) to end trading at $2.06.

Under the new debt servicing framework, a borrower's total debt obligations cannot exceed 60 per cent of his gross monthly income. While deemed severe in some sectors, a housing collapse is unlikely given that leverage in the system is not stretched and affordability is still sound,said CIMB analyst Donald Chua.

Indeed, financial institutions maintain an average mortgage servicing ratio (MSR) of 28‐30 per cent, well within 30‐40 per cent limit. As such, while average TDSR is higher, it is "substantially lower" than the prescribed 60 per cent.

And, while there have been instances of loans being extended to "guarantors" in an attempt to circumvent LTV (loan to value) limits, this trend is not prevalent.

Source: AmFraser