Even though the Total Debt Service Ratio (TDSR) and lowered Loan to Value (LTV) ratio have been implemented for more than a year, I believe the full impact of the measures have yet to surface.
Why?
From the run up in the property market from 2009 to 2013, in the absence of the two measures mentioned above, investors can over-leverage and buy multiple properties. Furthermore banks were dangling attractive interest rates to borrowers with typical lock-in periods of two and three years.
Those who were lucky to refinance before the measures can breathe easy for a while. For those who committed to a purchase from 2011, they will have to grapple with refinancing, easing rentals and the Seller's Stamp Duty (SSD) when the lock-in period ends and the development achieves its temporary occupation permit (TOP).
Borrowers with multiple loans will encounter difficulty refinancing with another bank as they have to meet the TDSR and LTV ratio. Even if they want to sell, they will need to pay SSD. If they hold, they might not be able to rent out the property at their desired rent (if they can find a tenant) to pay the mortgage. Effectively these people are at the mercy of the banks who can increase the interest rates.
Which brings me back to the title of the post - retirees. I know of retirees who depend on their property investments and other investments for passive income. The passive income may not be viewed favourably by banks and can be subjected to hairline cuts when re-assessing the repayment ability in the wake of the two measures. Some retirees might be forced to sell because they either cannot refinance or they face higher mortgage payments exceeding the rental collected on their property(ies).
One retiree is trying to offload his property at 20% below the last transacted price. The measures can deprive them of passive income in their golden years. Can they ever get back into the property market? Unlikely unless they do not take a loan as I do not see the two measures removed because they encourage financial prudence.
There will be more fire-sales coming up whether by retirees or speculators. Already I see owners trying to sell their completed properties of less than ten years for less than $1,000 psf. And these are in the city fringe areas.
Many investors are raring to go but held back because of the additional buyer's stamp duty (ABSD). When this tax is removed, transaction activity in the market is going to spike.
