MAS responds

Looks like MAS had 2 busy months preparing their response to the 50 years loan incident which probably caught them by surprise. Now housing loans are effectively limited to a maximum of 30 years where it had been predominantly 35 years before. Looks like they really want to jolt speculators into thinking twice before taking the plunge, though i suspect that other than hitting home the idea that another round of cooling measure have been introduced, the reduction in the loan tenure does not really hinder the speculators. The main hurdle in buying a property remains the down payment, be it 20% or 40%, and people who have the ability to cough up this amount will usually not be deterred by the increase in monthly instalment due to a 5 years reduction in loan tenure, which is likely to be anything from $100 to $500 for a typical mass-market private property.

Meanwhile, we hear news (or is it an advertisement?), at the same time as the report on MAS’s action, on how well properties are doing. Personally, I think the idea is to encourage properties to continue to do well, but avoiding bubble formation. Immediately after the announcement of QE3, Hong Kong authorities responded immediately with policy changes (more or less the same ones MAS put into effect). Sounds like they have been through this often enough to be driven to action so promptly, perhaps justly so, since Hong Kong is the freest economy in the world. One is forced to react when others don’t play by the book.

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