Shophouses The Latest To Feel The Pinch Of TDSR

By iCompareLoan Editorial Team

The pervasive effect of the Total Debt Servicing Ratio (TDSR) framework implemented on 28 June by MAS is felt not only in the residential property segment it seems, shophouses which can be considered as part residential and part commercial, or wholly commercial, are not spared either.

Unlike some other mortgage rules imposed, the 60% TDSR limit applies to all types of property.

Latest caveat data obtained on 9 September from URA, and analysed by Savills Singapore reveals that demand for shophouses has softened on the back of the TDSR rule. The number of caveats lodged with URA has slipped markedly.

Table 1: Caveats for Shophouse in May-Aug 2013

Source: URA

As seen, caveats halved in July from the preceding month following the new TDSR rule. This is normal market reaction as buyers take stock of new rules. In August, the 10 caveats shown here are only tentative figures as more caveats for the month’s transactions can be submitted in the coming weeks.

The true test of the effectiveness of the TDSR will be in the months ahead.

Altogether the total transactions value for shophouses in July to August, based on lodged caveats so far, is S$122.4 million; whereas the figures for first and second quarter 2013 stood at S$463.7 million and S$449.5 million, respectively.

Property market experts note that while sale brokered declined, prices continue to hold steady.

Mr Ashish Manchharam, regional director of investments at Jones Lang LaSalle (JLL), said that recent prices for shophouses in the Central Business District (CBD) averaged $2,200 to $2,500 per square foot (psf) of gross floor area (GFA), which is 10 to 15% higher than a year ago.

With the limited supply and the historical charm of shophouses, the value of these prized properties are somewhat immune to the volatility of the market, consider acquiring one if you can afford it. Speak to a mortgage specialist to compare home loans.

For advice on a new home loan.

For refinancing advice.

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