Preventing A Bubble - 18aayushk

Preventing a Property Bubble - The Restrictions of Debt in Singapore
To what extent have households been impacted by the Total Debt Servicing
Framework introduced by the Monetary Authority of Singapore in 2013?
Subject: Economics
Word Count (Not including citations, bibliography, appendix) : 3994

Table of Contents
Introduction..…………………………………………………………………...….. 1
Methodology.………………………………………………………………………. 3
Unique Characteristics of Singapore’s Property Landscape …………...… 4
Analysis of market landscape Pre-TDSR

Overview ………………………………….……………………………….... 5
Expansionary Monetary Policy ………………………………………….... 5
Foreign Direct Investment .………………………………………………... 7
High Foreign Immigration....……………………………………………….. 8
Consequences ..…………………………………………………………..... 8
Household Debt and Formation of Property Bubble ……………………. 11
Initial Contractionary Monetary Policies and Indirect Taxes ………........... 14
TDSR Policy ………………………………………….…………...……………….. 14
Reducing Risk of Bubble Forming …….…….………...…………………….... 18
Effects on Wealth ……………………………………….…………………...……. 20
Effects on Inequality ……………………………………….…………………...… 22
Impacts on specific income earners

Low income ..………………………………………………………………… 23
Middle Income ..………………………………...…………………………… 25
High Income ..……………………………………………………………...... 26
Conclusion ………………………………………………………………………… 26
Works Cited ……………………………………………………………………………..... 28
Appendix …………………………………………………………………………….......... 39

1
Introduction
Since its independence in 1959, Singapore has aspired to provide housing
to all its citizens (Beng, Yap Chin). In the words of former Prime Minister, Lee
Kuan Yew, this would offer “every citizen a stake in the country and its future”
(URA). Singapore has since created a unique property market, combining both
public and private housing. In addition to developing the public sector, which
houses an estimated 82% of the population, through the Housing and
Development Board (HDB), the government has also significantly tampered with
the private residential sector (Low, Donald) (Housing and Develop Board). The
world's third densest country has successfully established a consistent
homeownership rate of 90% over the last decade, a remarkable figure for a land
scarce nation facing pressures of growing GNI (Gross National Income) per
capita and immigration rates (World Bank) (“Homeownership Rate” – Singstat)
(“Population Structure” – Singstat).
From 2009 to 2012, Singapore experienced rapid population growth of
6.5%, increase in median earnings by 31%, low interest rates of less than 2%
and a highly liquid global environment following the US 2008 economic crisis
(Phang, Sock-Yong) (Interest Rates – Singstat) (World Bank). The cumulative
effect of these non-price determinants of demand led to escalating property
prices. Residential property price indexes (Base year 2009) in both public and
private sectors rose by more than 33 points over the three years (HDB) (URA).
With memories of the 1996-97 housing bubble still fresh, the government
implemented over fifteen price curbing policies between 2009 to 2013 (SRX)

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recognizing the growing public frustration with the accelerating property prices.
Singaporeans ranked ‘fixing’ property prices as their top concern (Our Singapore
Conversation Survey).
In June 29th 2013 Singapore introduced the Total Debt Servicing Ratio
(TDSR) framework causing property prices to fall for the first time since 2009. A
macro prudential policy, TDSR requires total debt obligations including car loans,
education loans and even credit card payments for an individual not to exceed
60% of his or her monthly income (“Debt Serving Framework Introduction” -
MAS). Restricting leverage, the government aimed to secure its population’s
financial safety and control demand. The diminishing property prices were
viewed as a success for the Singapore Government (Appendix 3.7).
An investigation of this regulatory policy from both economic and social
perspectives is essential for greater understanding of its complex impacts. This
paper will analyse TDSR’s impact on the economy as well as the varying effects
on homeowners and prospective buyers within different economic strata’s
through the research question: To what extent have households been
impacted by the TDSR framework introduced by the Monetary Authority of
Singapore in 2013?

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Methodology
Primary and secondary research was conducted to understand TDSR and
analyse its impact on the Singaporean economy as well as the individual
households of varying income levels. The information released in government
publications and journals is limited and primarily quantitative, often ignoring the
social implications and diverse perspectives of the stakeholders. To bridge this
gap, the author engaged in both qualitative and quantitative research, in addition
to collecting data from numerous sources.
At the outset, the secondary data published by the government (Monetary
Authority of Singapore, Urban Redevelopment Authority, Housing and
Development Board, and Department of Statistics), financial/economic
journalists, published research papers and world institutions such as the World
Bank was used to identify the changing economic landscape of Singapore, with a
specific focus on the TDSR policy. Key indicators such as but not limited to
homeownership rate, property transactions, property price indexes, average
household debt allowed the author to draw inferences and better understand the
property market before and after the introduction of TDSR.
Primary research included interviews and surveys of citizens from different
economic strata’s and professions. Surveys provided quantitative understanding
of social views while open-ended questions and direct first-hand conversations in
public parks, trains and taxis revealed new perspectives and contrasting insights.
Interviews with professionals including financial risk managers, private bankers,
lawyers, government officials and local property brokers gave deeper insight into

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the macro and microeconomic implications of TDSR. The new understandings
explored Singapore’s monetary, immigration and exchange rate policies within a
global environment.
The concepts of supply and demand, monetary policy, risk analysis,
macroeconomic indicators and wealth inequality give visibility to the various
impacts of TDSR. Through a systematic analysis this essay investigates not only
what happened but also what may have been prevented. These effects,
sometimes ignored, offer more valuable insight than what is visible at first sight.
Unique Characteristics of Singapore’s Property Landscape
Research into a variety of property models was conducted to discern the
landscape of Singapore property, which prompted the introduction of TDSR. The
models of the western world, including Theory of Price Movements explained by
John Muth in 1960, and the second generation User Cost Models, Dougherty and
Van Order in 1982 were found to be incompetent to reflect the Singapore
property landscape due to the following unique characteristics of the urban
country:
1. Strong capital investments and regulations imposed by the government
limit the number of property developers creating an oligopolistic informal
cartel. Dictating high prices of new properties entering the market, this
cartel creates an ‘indicator effect’, increasing prices in the second hand
market (Yip, Paul).

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2. John Muth’s paper stated the assertion “information is scarce”(Muth,
John). With exact prices of every transaction published in newspapers and
available online, the Singapore economy is transparent (URA).
3. Unlike other property markets worldwide, the majority of residential
property in Singapore is public (73.3%), developed by the HDB (HDB).
Source : Department of Singapore Statistics. Housing and Development Board. Singapore in

Figure - 2017. Department of Statistics Singapore, Jan. 2017. Web. 24 June
2017. <http://www.singstat.gov.sg/docs/default-source/default-document-
library/publications/publications_and_papers/reference/sif2017.pdf>.
These characteristics help understand the rationale and impact of the TDSR.
Analysis of market landscape Pre-TDSR
Overview
In 2008-2012, the Singapore property market saw a ‘housing boom’ as
prices in private and public sectors skyrocketed (Figure 5)(Figure 6). The
circumstances leading to this price explosion were:
Monetary Policy
No economy exists in isolation. “American economic movements play a
large role in determining Singaporean Monetary Policy”, explains Surendran Nair,
Senior Manager, Bank of Singapore during a private interview (Appendix 3.3). To
regulate the impact of external volatility in Singapore’s open economy and stay

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competitive in global trade, the Monetary Authority of Singapore (Singapore’s
central bank) manages its monetary policy through the manipulation of exchange
rates (Monetary Authority of Singapore). Thus Singapore leaves it money supply
and domestic interest rates to be largely determined by free market forces, i.e.
“foreign interest rates” of its major trading partners, particularly the US
(Internations).
To contain the widespread impact of the US financial crisis in 2007/2008
stemming from a housing bubble, the US government implemented multiple
rounds of quantitative easing which saw federal fund rates fall below 0.5% from
2008 to 2012(Neely, Christopher)(“Effective Federal Fund Rates” – FRED).
US Federal Fund Rates and Singapore Average Overnight interest

Rate from 2005-2017
Source: Self made – data from:

Singapore Average Overnight Interest Rate: Monetary Authority of Singapore (“Singapore Average Overnight…”
US Fed Fund Rates: US Federal Reserve (US Fed Rates)
The Singaporean domestic interest rates fell in tandem with the US
interest rates (Figure 1). Lower interest rates led to a fall in mortgage rates (0.5-
2.0%), cheaper borrowing which incentivized greater investments (Yip, Paul)
leading to increased demand in property. In the words of Ravi Menon,

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Managing Director of Monetary Authority of Singapore (MAS), “the short term
interest rates at or close to zero...spurred strong demand for credit in Asia and
banks flushed with liquidity are more than willing to lend” (“MAS Annual Report
2012/2013”).
Foreign Direct Investment
The lower interest rates stemming from the US crisis created a liquid
environment globally (Yip, Paul). Without confidence in the US economy,
investors looked overseas. FDI, foreign direct investment, in Singapore from the
United States doubled from S$ 52.76 million to S$105.1 million between 2008
and 2012(“Foreign Direct Investment” – Singstat). Chinese and Malaysian
investors also looked towards Singapore as a safe investment option (Khoo,
Lynette). Figure 2 illustrates the dramatic increase in FDI in real estate,
indicating increased demand.
Source: Self made -‐ data from Singstat, Department of Statistics Singapore, (“Foreign
Direct Investment in Singapore By country/Region”). Appendix 2.1.

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High Foreign Immigration
From 2007 to
2012, the total
population
increased by
15.7%, primarily
due to the arrival of
well educated,
skilled and high Source: Self made -‐ data from Singstat (“Population Structure”). Appendix 2.2

earning expatriates (Figure 3). Surveys conducted by HSBC (Hongkong and
Shanghai Banking Corporation) in 2012 revealed that Singapore had the world's
wealthiest expat population (HSBC). Over 20 percent of the US$200,000-
US$250,000 earners surveyed invested in real estate (Hyslop), indicating
increased demand for property.
Consequences
The ability and willingness to
purchase property at every price
level increased as can be seen in
shift from D2009 to D2012 (Figure 4).
The demand for new HDB property
was 64,767 between 2006/07 -
2010/11, and increased to 93,995
Self created micro supply-‐demand graph. Appendix 2.3

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between years 2011/12 – 2013/14 (HDB Annual Report 2013/2014). This led the
HDB to supply more property as it continued to increase subsidies for first and
second time buyers shifting the supply curve to the right, moving the equilibrium
to E2. Market characteristics such as the oligopolistic informal cartel, artificially
raising second hand property prices (Indicator effect), shifted prices above
equilibrium to 143 index points (Appendix 2.3). At E3, there is a high surplus in
private property, representing the 6.1% vacant units in 2012 (Urban
Redevelopment Authority).
Figures 5 and 6 illustrate the total effect of increased demand on price in
both private and public property sectors.

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Source: Self made -‐ data from the Urban Redevelopment Authority (“PPPI” – URA). Appendix 2.3

Source: Self made – data from Housing and Development Board (“Median Resale Prices”-‐ HDB).
Appendix 2.4.

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Household Debt and Formation of Property Bubble
As prices continued to rise, the residential property buyers began to
exhibit bullish sentiments expecting continued price increases. New properties
were being developed, allowing the ‘informal cartel’ of developers to use the
indicator effect to raise prices throughout the industry leading to further
speculation. The MAS estimated that 5-10% of borrowers were overleveraging
themselves (Menon, Ravi). Loans for housing as a percentage of GDP were 45%
in 2012, a concerningly high figure (“MAS Annual Report 2012/2013”). The steep
rise in mortgage loans and household debt can be observed in Figure 7.
Source: Self made -‐ data from the “International Bank of Settlement” (Household Debt as percentage of GDP)
and Singstat “Total Mortgage Loans – Singstat”. Appendix 2.5

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A bubble represents an unsustainable increase in asset prices at a
rate higher than growth and inflation. A Goldman’s report states that all
property bubbles seem to have four common features (Fung, Esther):
1. Prices increase rapidly, especially when compared with market
fundamentals
2. Irrational expectations fuel excessive speculation
3. Quantitative easing and regulation gaps create a highly leveraged credit
economy
4. The supply of property booms due to expectations of future income
Not backed by strong economic fundamentals, bubbles sooner or later
burst severely disrupting the economy. In some cases bursts cause political and
social instability (Appendix 3.3).
The Singapore economy showed symptoms resembling the first three
criteria by the years 2011. An analysis of the situation of a middle-income earner
highlights the risk faced by individuals and the country as a whole. In 2013 the
median earning in Singapore was S$2247 (“Household Income Trends” -
Singstat). MAS cited numerous examples of individuals and households paying
60-90% of their monthly income as debt installments (Menon, Ravi), implying that
the median income earner was able to take total loans (house + car + other
items) of up to S$500,000 over 25 years. The mortgage rate at the time can be
presumed to be 0.9%, the sum of three-month interbank rate - 0.2% and spread
of the loaning bank - 0.7%(“3-Month Fixed Deposit Rate” - Singstat) (UOB).

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Through mortgage calculations, it can be deduced that the monthly installments
would be S$1903; 85% of monthly income (Appendix 3.2). With a large
percentage of mortgage loans on floating-rate packages, citizens would be
impacted by any change in interest rates. Had the three-month interbank rate
normalized, and risen to 0.8%, the interest rate would increase to (0.8+0.7) 1.5%.
The monthly installment would rise to S$2071, a staggering 92 percent of income
leaving a small, probably insufficient, amount to cover monthly needs (Appendix
3.2). A loss of 48% in disposable income increases risk of default and non-
performing loans (NPLs). This example highlights the situation of many lower to
middle income earning Singaporeans. Symptomatic of a sharp painful needle
that can burst an economic bubble, these unsustainable household investments
posed a risk to the entire economy. Foreclosures and NPLs lower property prices
as banks sell assets at discount, leading to losses (Hartley, Daniel). Banks often
increase interest rates to recuperate bank losses, forming more NPLs and
starting the downward spiraling trend in prices, leading to high loss of wealth for
the masses.
With limited control over local interest rates, and growing concern over the
Singaporean households ability to sustainably manage their debt if interest rates
rose, MAS took action.

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Initial Contractionary Monetary Policies and Indirect Taxes
From September 2009 to January 2013, MAS implemented multiple
measures to control rising prices (Property Market Measure) including the:
1. Introduction and increase of Seller Stamp Duty (SSD) for properties
bought and sold in quick succession
2. Implementation and increase of additional buyer stamp duty (ABSD) for
overseas investors and those purchasing more than one property
3. Changes in Loan To Value (LTV) limit from 90% to 80%
While the foreign demand for property slowed down, the local demand
seemed undeterred in its consumption habits (Zu, Min). The HDB resale and
private property index prices continued to rise (Appendix 2.3). Perturbed, MAS
chose to implement a macro-prudential regulatory policy in addition to the
market-based policies.
TDSR Policy
The TDSR policy required financial institutions to assess their clients’
borrowing, ensuring that their outstanding monthly debt payment did not exceed
60% of gross monthly income. This reduced the available funds for investment,
decreasing demand for property. Much higher than the prevailing mortgage rate,
the rate of 3.5% was stipulated for TDSR calculations, which created a safety net
for the borrowers against a possible interest rate hike. The Gross Monthly
Income was calculated by deducting liabilities from income, further decreasing

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high leverage investment opportunities (“Debt Serving Framework Introduction” -
MAS).
The ASEAN Risk Manager at Citibank, Mr Suresh Raman, explained the
policy as “the whipped cream on top of the ice coffee,” during a private interview
(Appendix 3.4).
Private Property Transaction 2010 -‐ 2015

The Ice Coffee
represents the energetic
blend of the price curbing
policies implemented
prior to TDSR. Even
though private property
resale transactions Adapted from original source:

URA. "Release of 2nd Quarter 2015 Real Estate Statistics." Media Release.
Urban Redevelopment Authority, 24 July 2015. Web. 11 Aug.
halved from 4000 units in 2017. <https://www.ura.gov.sg/uol/media-room/news/2015/jul/pr15-39.aspx>.

2012 Q4 to approximately 2000 in 2013 Q1 (Figure 8), the property prices held
as:
1. Less experienced investors still seemed eager to invest (Yip, Paul) in the
hope of continued escalation.
2. ‘Smaller’ financial institutions with less stringent mortgage conditions,
continued to offer unsafe loans to less experienced highly leveraged
clients (Appendix 3.3)
3. Long-term investors remained undeterred, as the Seller Stamp duty
focused on short term investment (IRIS).

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4. The power informal cartel of developers with margins of at least 30-50%,
were able to use their pricing power to maintain high prices (Yip, Paul).
The Whipped Cream effect represents the TDSR which was effective as it:
1. Restricted high leverage borrowing with immediate effect, encouraging
greater financial prudence in all investments. The reduction in demand
reduced psychological speculation forcing all stakeholders to slow down
and reflect on the market, breaking away from the spiraling irrational
bullish sentient. This reduced short and long-term investment (Yip, Paul).
2. Forced banks to carefully evaluate loans, restricting less stringent banks
from profiting off high leverage loans. This also prevented the small group
of ‘kiting’ investors from paying one loan (of one bank) through another
loan (from a different bank); a system destined to collapse.
3. Signaled to developers that property prices were not going to re-spiral
upwards, and had to fall (Appendix 3.4).
The effects outlined
decreased demand for property
as seen in the shift from D1 to D2
(Figure 9). At the same time a
large number of construction
projects, initiated when prices
and demand were rising, were

Self created micro supply-‐demand graph. Appendix 2.3

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completed. In fact from 2013 to 2014, flats constructed by HDB increased 113%
(“Households” - Singstat). The increased supply and decreased demand at all
price levels shifted E1 to E2 decreasing the median property prices significantly
as illustrated in Figure 10 and 11.
Source: Self m ade – data from Housing Development Board (“Median Resale Prices”-‐ HDB). Appendix 2.4.

Source: Self made -‐ data from the Urban Redevelopment Authority (“PPPI” – URA). Appendix 2.6

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Reducing Risk of Bubble Forming
Benefit (Avoiding Catastrophe through Risk Management)
Through intervention (TDSR) the government was able to reduce prices,
speculation and leverage. Following the TDSR, the rate of total increase in
mortgage decreased to consistently lower than 2% indicating greater financial
prudence (Figure 12). By 2015, MAS found that only 22,000 Singaporeans
needed support to manage their debt.
Source: Self m ade – data processed from Singstat (“Total Mortgage Loans” – Singstat) Appendix 2.7

A comparison of the US and Singapore Pricing indexes illustrates the sharp
decline in the US market crash (Figure 13) contrasting with a regulated fall in
Singapore (Figure 14).

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Source: Self made – data from U.S. Fed (US Federal Housing Agency). Appendix 2.8

Source: Self made – data from Urban Redevelopment Authority (“PPPI” – URA) and
HDB (“HDB Resale Price Index” – Singstat).

The graphs contrast what could have happened and what has taken place
in the Singapore property landscape. Observing the gradual decline of residential
prices for 11 straight quarters, David Skilling, Director of LandFall Strategy

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Group, explained, “The Singapore way is not to crash the market, it’s to do it in a
very calibrated way”(Macfie, Rebecca).
A property bubble
bursting in Singapore due to
foreclosures and bankruptcies
would not only significantly
decrease property prices but
also reduce confidence in the
economy. As consumer
spending and investment Source:

Dorgon, Gearge. “Irvin Fisher’s Deflationary Sprial.” Snbshf.com.
N.P, 11 Jan. 2013. Web. 23 June 2017.
decreases, aggregate demand, <https://snbchf.com/economic-theory/delationary-spiral/>.

GDP and employment rates al decrease, reflecting the beginnings of a
deflationary cycle. Each job lost, each foreclosure and each bankruptcy brings an
immeasurable amount of suffering, which the TDSR avoided.
Effects on Wealth
Source: Self made – data from Singstat (“Household Sector Balance Sheet” – Singstat).
Appendix 3.0

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The TDSR significantly reduced wealth for a majority of Singaporeans, as
90.1% of households are homeowners (“Homeownership Rate” – Singstat).
According to calculations, property accounted for about 57% of Singaporeans net
worth in 2013 (Appendix 2.9). Property net worth fell for the first time since 2009
in 2013 Q4. Avoiding both a continued steep rise in net worth (black dotted line in
Figure 15) and a sharp decline due to a bubble bursting (purple dotted line), the
Singapore government had taken a path of reduced risk and controlled
valuations.
The lower and middle-income households felt this loss most even though
wealthier individuals likely lost more capital. With a 10.1% dip in property value,
as seen from 2013 to 2015, the decline in value of a property worth S$400,000
would reflect over five months of earnings for a median-income earning
household earning S$7872 (“Household Income Trends” – Singstat).
In the long run the TDSR may have prevented a large loss of wealth
for citizens by sacrificing a relatively smaller portion of wealth in the short
run.

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Effects on Inequality
Inequality breed’s corruption, causes social unrest and hinders economic
growth (Hoang, Paul). Instead of looking at the Singaporean Gini coefficient,
which only highlights income inequality, it is worthwhile to study the disparity in
wealth, a better indicator of ability to spend (Chan, Robin).
Source: Self-Made – Data acquired from Credit Suisse, originally published by HSBC.
Appendix 3.1
Without a Gini-coefficient of wealth, the difference between mean and
median wealth, estimated by HSBC, was used to understand the changing
inequality levels. The difference reflects the amount of wealth in the hands of the
rich, indicating the highly inequitable distribution of wealth in Singapore.
After the implementation of TDSR, the average value of property decreased as
shown by the decline in average wealth (Figure 16). High net worth individuals
owning multiple properties lost a greater amount of potential and real wealth as
compared to the lower net worth individuals, owning relatively less. Proof can be
seen observing the greater rate of average wealth decline when compared to

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median wealth. The reducing disparity between the mean and median wealth
indicates that the wealth inequality is most likely reducing, however it cannot be
confirmed without a complete coefficient of wealth of all citizens. Tilak
Abeysinghe and Wong Yan Hao, National University of Singapore researchers,
found a small yet visible correlation between the property market in Singapore
and income inequality (Abeysinghe, Tilak). This suggests that in the long run, the
TDSR will continue to decrease wealth and income inequality.
Impact on Specific Income Earners
The varying effects of TDSR on the following income groups will be analyzed.
Figure #17
Income groups in Singapore (based on 2014 statistics)
Category Average Household Income Population Deciles

household income (S$) brackets (S$)
Lower 3,547 0 - 5,226 1st - 30th

Income
Middle 8,425 5,227 - 10,108 31st - 60th

income
High 14,791 10,109 - 18,017 61st - 90th

Income
Top 31,142 18,018 - above 91st - 100th

Income
Source: Data processed off original data (“Average Monthly Household Income
from Work” – Singstat)
Lower Income
The vast majorities of low-income households either live in a HDB or
aspire to own one. Earning a monthly income less than S$5226, this group of

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stakeholders is at high risk of being affected by any sudden economic shock,
personal or national (figure 17). With a high percentage of their disposable
income spent on necessities many of these families have limited savings. The
TDSR policy offers them much needed support by forcing financial institutions
to carefully monitor their risk, ensuring economic stability. As property
broker Joey Tan explained during the interview, “If the earning member loses his
job, lower income families in debt can quickly be in deep trouble” (Appendix 3.6).
The TDSR creates a safety net, restricting personal loans and credit card
spending but limits freedom to borrow, both for capital investments and
personal spending. Lower income citizens, who may have been willing to give
up large percentages of their monthly income to make investments, no longer
have that personal choice.
For the low-income earners owning a house, effects of TDSR are
minimal. Lacking a government subsidy, a second HDB is unaffordable. Without
the purchasing power or need to buy another HDB, property price changes do
not impact their day-to-day life. A taxi driver explained, “I have already made my
investment. I don’t know about TDSR or the prices, it doesn’t affect
me”(Appendix 1.8).
For ‘non-homeowners’ TDSR made housing cheaper. Had the prices
continued to rise, lower income earners would have found property prices
unaffordable. However, the TDSR policy limits choices in terms of ‘affording’
a HDB. While prices are cheaper, the ability to borrow is also lower, which may
limit opportunities to buy larger, or more convenient apartments. It also must be

25
noted that the price to rent ratio remained constant during, and after TDSR, thus
making rental prices on average decrease (SRX). This would support the lower
income earners who are paying rent.
Middle Income
The middle-income earners are most impacted by TDSR. Usually owning
and residing in HDBs, these citizens are often looking to expand into bigger
apartments, invest speculatively and work towards private investments. A Senior
Relationship Manager, noted, “They aspire to have an additional condominium
and the propensity to overspend is the highest in this bracket, not realizing that
the property prices do not always move in one direction” (Appendix 3.3). The
middle-income earners often place themselves in unfavorable high-risk situations
(“MAS Annual Report 2012/2013”).
Had property prices continued to rise, many more from this group would
have engaged in speculative, unsustainable investment after seeing recent
profits in the industry. The TDSR reduced ability to increase their loan
portfolio and invest without financial backing, keeping these stakeholders
safe and secure. Interviews with the middle class highlighted the concern that
the policy restricts personal rights and opportunities, however it cannot be denied
that the TDSR significantly reduces exposure to fluctuation in the economy
(Appendix 1.1, 1.3, 1.4, 1.5).

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High Income and Top Income
Since TDSR in combination with other policies reduced speculation in the
economy, the high and top income earning group’s investments in property
yielded less returns than it would have otherwise, reducing wealth. However the
policy safeguards the economy from a meltdown, which would have hurt these
households substantially.
The TDSR policy did not affect the investment opportunities for this group,
especially households which can invest without taking a loan. Those who need to
take a loan fulfill TDSR requirements with ease with high average income and
wealth. Thirdly, with access to private banking, this group has the possibility to
use the TDSR-exempt route allowing households with significant assets,
insurance policies and wealth to invest into additional properties surpassing
regulations (Appendix 3.3).
To conclude the high income earners can still invest if they choose to do
so. However as property prices stagnate, they will probably turn to other forms of
investments in Singapore or overseas, which would reduce money within the
economy.
Conclusion
The TDSR, introduced by MAS, has considerably impacted households
from all categories. Wary of the possibility of rising interest rates, the policy
reduced the risks of NPL’s and foreclosures especially for lower to middle income
earners. By reducing the risk of a property bubble bursting, the TDSR kept the

27
entire Singapore economy and the wealth of its citizen’s safe. Even though the
risk adverse policy restricted the lower to middle income earners opportunities for
spending and investment, it improved equity in distribution of wealth/income and
reduced their exposure to economic fluctuations. Marginally impacting the high-
income households ability to borrow, the TDSR did however reduce their wealth
in property.
Citizens of the island state appreciate the role the government played in
implementing stringent rules to regulate the property market. During a private
interview, Senior Legal Counsel at Swiss Re shared her positive view, “The
TDSR is actually to protect us. Maybe the issues were not close enough for
people like us to feel it, but the government had enough foresight to see that we
were headed in the wrong direction”(Appendix 3.4). This reflects the public
opinion in Singapore; while only 2 of the 10 interviewed knew about the TDSR
policy, a majority thought favorably about the government’s property curbing
policies (Appendix 1.1 – 1.10).
The success of TDSR cannot be denied and governments in Hong Kong
and Thailand have introduced similar policies (Appendix 3.4). It will be interesting
to watch the future of the Singapore property sector as pent-up demand could
very easily reinvigorate another bubble.

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39
Appendix
Appendix 1.1 - Survey (TEACHER)
What do you think about the property market in Singapore? Can you rate your
satisfaction on a scale of 1 to 10.
If you talk about cost then it would be on the lower end but if you talk about size
when you compare it to size I think it would be one the higher house. I would say
about 8.
Do you personally own a house?
Yes
Is it private or public?
Public
Has your land/apartment appreciated in value? Are you thinking of buying a
house/another house?
No I think we have made our major Investment already now.
I’ve read that the property prices have declined since about 2013. Why do you
think that is the case?
I think it has dipped a little. It didn’t really dip but it did not increase proportionally.
Maybe there is an over supply?

40
(If person has heard about property prices falling) Do you think it's affected you in
any direct ways?
Not really no, I haven’t really been involved.
Have you heard of the TDSR policy, which restricts buyers from borrowing over
60% of their monthly income? If so, what do you think of it?
I’ve never heard of TDSR. But I think it depends on the situation la, it depends
whether we want to invest or stay.
Do you think more should be done by the government to intervene in the market
or less? Can you rate how much more intervention you would like from 1 to 10.
I’d prefer if it was more affordable especially for people who just started working.
Appendix 1.2 - Survey (SAFETY OFFICER CONSTRUCTION)
7 to 8, Because its stable, property is well maintained and very very safe.
Yes
Private

41
Appreciated a bit and thinking of reinvesting.
Decline because of all this cooling measure but the volume of transactions still
high due to foreign buyers ah.
any direct ways?
Yes, I mean like it gives me some investment opportunities. Also my flats
valuations gone down recently.
or less? Can you rate this intervention from 1 to 10.
Depend, of course we want to make profit but we also must concern for the next
generation so it's good la they coming with all these cooling measure but your
talking about private I think the government should not intervene in the private
sector, only intervene in Public sector.

42
Appendix 1.3 - Survey (SOLE TRADER)
I think it's quite expensive compared to other places. I would give it a 7.
Yes
Public
Ah yes, it's appreciated but not so much thinking of buying a new house.
I think the government has put in some cooling measures.
any direct ways?
It’s affected my job quite a lot, the investors locally have been making different
decisions based on the results.

43
Ah I think it's good so people can manage their debts better and it's easier to buy
property for my children.
or less? How has the property market impacted you? Can you rate this
intervention from 1 to 10.
Moderate amount, maybe a 5.
Appendix 1.4 - Survey (SALES TEAM IN MEDIA CORP)
6, I rent a house and the renting prices are significantly high and it's the same
throughout the city so there is no space where you can probably get a house.
No

44
N/A
Ah yes, it's appreciated but not so much thinking of buying a new house.
Not sure actually, I’ve just been here 3 year.
any direct ways? N/A
The government should intervene more. Maybe a 8.
Appendix 1.5 - Survey (RESTERAUNTEER)

45
Yes
Public
No
I think we are not so competitive globally now, I mean in our region there is a lot
of people(places) coming up like Shanghai, India, China. In Southeast Asia we
are still competitive but in Asia not so much.
any direct ways?
Not really. The rent at my place has stayed the same.

46
No, Never heard of it.
I’m definitely in for like reducing prices. So like personally my house came
from like my late parent so I’m not really aware of all of these property laws.
Appendix 1.6 - Survey (UBER DRIVER)
Yes
Public

47
For me it doesn't affect me so I don’t know why the prices are going down.
any direct ways? N/A
I’ve never heard of TDSR.
Yeah a 10, I would like the prices to go down.

48
Appendix 1.7 - Survey (TAXI DRIVER 1)
If you talk about cost then it would be on the lower end but if you talk about size
when you compare it to size I think it would be one the higher house.
Yes
Public
I think it has dipped a little. It didn’t really dip but it did not increase proportionally.
Maybe there is an over supply?

49
any direct ways?
No, not in a way I’ve noticed ah.
I’ve never heard of TDSR. But I think it depends on the situation la, it depends
whether we want to invest or stay.
I’d prefer if it was more affordable especially for people who just started working.
I think I’d rate it about a 8, the property market is stable now and looking to go
up.
Yes

50
Public
My family has owned property since I was a child. I think it has appreciated quite
a bit but I’m happy with it. Not looking to invest at the moment but maybe in the
future.
Not sure ah.
any direct ways?
I have already made my investment. I don’t know about TDSR or the prices, it
doesn’t affect me.
No

51
3, I don’t think they should value reduce the value in property too significantly.
Just keep it regulated.
The prices are very high and the paperwork is a lot, isn’t it? I’d say I’m happy
because the value of the currently own has appreciated.
Yes
Private
Yes, because we’re looking at landed property as a longer term investment
rather than the property we currently own.

52
I have no clue.
any direct ways?
Yes, the potential of sale of my current asset has changed.
No idea
I feel like to a extent it would be useful because it would give me a wider choice
of property, but I feel if prices go too low I their would be too much competition, 7.
Appendix 1.10 - Survey (STUDENT)

53
6, The prices are really high and it must be hard for people with lower incomes to
stay here.
Yes
Private
Well, I think it has appreciated because of the high demand. I’m trying to buy a
new property for my National Service.
Because, I don’t know
any direct ways?
Nope not really.

54
No
3, I think the government should slightly intervene but let the free market control
a majority of the property market.
Appendix 2.1 - FDI Data
Appendix 2.2 - Population Data
Appendix 2.3 - Property Indexes

55
Private Property Public Property

Total Index ((0.2*Private
Index (2009 Base Index (2009 Base
+ 0.8*Public)/2)
Year Year) Year)
2004 Q1 80.3 75.3 76.3
2005 Q1 81.9 77.2 78.14
2006 Q1 85.8 73.6 76.04
2007 Q1 97.6 75.8 80.16
2008 Q1 126.7 91.3 98.38
2009 Q1 100 100 100
2010 Q1 125.1 112.1 114.7
2011 Q1 142.3 126.4 129.58
2012 Q1 147.2 138.5 140.24
2013 Q1 152.4 148.6 149.36
2014 Q1 151.3 143.5 145.06
Private Property Index - Data acquired from Urban Redevelopment Authority
(URA)
Public Property Index - Data acquired from Housing and Development Board
(HDB)

56
Since 80% of property is public, the total property index was calculated using a
8:2 ratio of public to private property.
Appendix 2.4 - Public Property 3 Bedroom Median Prices
3 Bedroom Media HDB Price at different locations (Singapore Dollar)
Bukit Merah Jurong East Tampines Yishun

Bedok (East)
Year (Central) (West) (East) (North)
2007 $193,000.00 $230,000.00 $190,800.00 $222,000.00 $178,000.00
2008 $232,000.00 $270,000.00 $236,000.00 $256,000.00 $217,000.00
2009 $252,000.00 $303,500.00 $259,500.00 $282,000.00 $240,000.00
2010 $300,000.00 $345,000.00 $293,000.00 $316,000.00 $280,000.00
2011 $331,500.00 $376,500.00 $325,000.00 $356,000.00 $312,000.00
2012 $348,000.00 $388,000.00 $341,000.00 $375,000.00 $335,000.00
Appendix 2.5 - Total Mortgage and Household Debt Data
The Bank for International Settlements. "Singapore Household Debt to
GDP."TheGlobalEconomy.com. N.p., 2017. Web. 23 June 2017.

57
<http://www.theglobaleconomy.com/Singapore/household_debt_gdp/>.
Appendix 2.6 - Private Property Indexes (Published by URA, acquired from
Singstat)
Time (Year - Core Central Rest Of Central Outside Central
Quarter) Region Region Region
2007 1Q 100.7 100.6 89.7
2007 2Q 108.6 108.7 96.1
2007 3Q 117.7 117.4 103.7
2007 4Q 126.5 126.4 111
2008 1Q 131.3 130.6 115.2
2008 2Q 131.2 131.5 116.3
2008 3Q 127.6 128.3 114.6
2008 4Q 119.4 120.4 107.9
2009 1Q 100 100 100
2009 2Q 94.8 95.6 97.7

58
2009 3Q 109.2 113.3 113.4
2009 4Q 117.2 124.1 120.5
2010 1Q 122.4 133.8 125.7
2010 2Q 128.9 140 132.9
2010 3Q 131 143.3 135.8
2010 4Q 133.9 145.9 138.6
2011 1Q 135.3 148.9 142.8
2011 2Q 137.5 150.6 145.3
2011 3Q 138.5 152.4 148.4
2011 4Q 139.2 152.5 149.2
2012 1Q 138.4 151.7 150.9
2012 2Q 139.2 152.3 151.6
2012 3Q 139.4 153.6 153.2
2012 4Q 140.3 155 158.9
2013 1Q 141.2 155.3 161.1
2013 2Q 140.9 155.6 167.3
2013 3Q 140.5 154.2 170.9
2013 4Q 137.6 154.8 169.3
2014 1Q 136.2 149.7 169.1
2014 2Q 134.2 149.2 167.6

59
2014 3Q 133.1 148.6 167
2014 4Q 131.9 146.6 165.6
2015 1Q 131.4 144.1 163.8
2015 2Q 130.6 143.2 162
2015 3Q 129 140.9 159.4
2015 4Q 128.6 140.3 159.4
2016 1Q 129 140.3 157.3
2016 2Q 129.4 140.6 156.5
2016 3Q 126.9 139.2 154.9
2016 4Q 127 136.4 154
2017 1Q 126.5 136.8 154.2
Appendix 2.7 - Singaporean Mortgage Data
Total Mortgage Percentage Change
2008 4Q 130,171 0.47
130,788.80 1.34
132,536.20 2.84

60
136,296.30 2.85
2009 4Q 140,177.10 1.92
142,874.50 3.80
148,299.50 3.43
153,388.50 3.22
2010 4Q 158,326.30 2.31
161,989.60 2.39
165,858.60 2.86
170,607.70 2.33
2011 4Q 174,589.50 1.73
177,614.30 2.51
182,065.50 2.53
186,677.10 3.39
2012 4Q 193,006.90 1.91
196,689.70 1.42
199,491.40 1.68
202,839.30 1.26
2013 4Q 205,385.20 1.06
207,569.40 1.51
210,708 1.33

61
213,516.10 1.50 Percentage change was found by
using the following formula:

2014 4Q 216,714.20 0.87
218,599.50 0.61
𝑁𝑒𝑤 − 𝑂𝑙𝑑
%∆= ∗ 100
219,932.40 1.27 𝑂𝑙𝑑
222,721.10 0.90

62
Appendix 2.8 - US Price Index
Source :
U.S. Federal Housing Finance Agency, Purchase Only House Price
Index for the United States
[HPIPONM226S], retrieved from FRED, Federal Reserve Bank of
St. Louis;
July 19, 2017. <https://fred.stlouisfed.org/series/HPIPONM226S>.
Year US Property Price Index (Base Year : 1991)
2003 Q1 168.08
172.39
176.11
178.72
2004 Q1 182.06
188.47
193.7
196.82
2005 Q1 200.99
208.52
214.27
216.86

63
2006 Q1 219.29
223.56
224.27
223.27
2007 Q1 223.66
226.19
223.58
217.5
2008 Q1 211.33
208.62
203.67
195.66
2009 Q1 193.39
193.95
193.13
190.92
2010 Q1 187.49
190.23
187.28
183.25

64
2011 Q1 177.52
179.93
180.95
178.92
2012 Q1 178.12
185.28
187.61
187.99
2013 Q1 190.17
198.7
202.23
201.56
2014 Q1 202.6
208.98
211.53
211.32
2015 Q1 213.01

65
Appendix 2.9 - Property Value as percentage of Household Net Worth
Source for raw data:
SingStat. "Household Sector Balance Sheet (End Of Period), Quarterly."
SingStat Table Builder. Department of Statistics Singapore, 03 Jan. 2017. Web.
18 June 2017.
d=15312>.
Calculations
Property as average percentage of Household Net Worth
!"#$%"&'$() !""#$"
= !"#$% !!"#$!!"# !"# !"#$! ∗ 100
!"",!"#.!
=!"#,!"#.!", ∗ 100
= 57.1%

66
Appendix 3.0 - Property Net Worth
"Household Sector Balance Sheet (End Of Period), Quarterly." SingStat Table Builder.
Department of Statistics Singapore, 03 Jan. 2017. Web. 18 June 2017.
d=15312>.
Year Resedential Property Asset(Million Sing Dollar)
2003.25 362,267
2003.5 366,751
2003.75 368,048
2004 370,679
2004.25 371,835
2004.5 377,777
2004.75 376,579
2005 381,719
2005.25 381,497
2005.5 373,385
2005.75 380,182
2006 384,210
2006.25 390,302

67
2006.5 396,271
2006.75 399,419
2007 407,778
2007.25 421,883
2007.5 446,665
2007.75 479,342
2008 506,100
2008.25 526,753
2008.5 539,963
2008.75 546,323
2009 539,616
2009.25 505,366
2009.5 502,023
2009.75 543,123
2010 576,056
2010.25 607,134
2010.5 639,642
2010.75 665,931
2011 689,351
2011.25 704,677
2011.5 727,978
2011.75 751,094
2012 760,106
2012.25 768,094
2012.5 779,624
2012.75 793,256
2013 813,190

68
2013.25 823,207
2013.5 835,831
2013.75 836,891
2014 828,416
2014.25 824,590
2014.5 826,293
2014.75 823,930
2015 818,711
2015.25 823,820
2015.5 825,129
2015.75 831,637
2016 833,490
Appendix 3.1 - Wealth Inequality Data (HSBC)
Source: Shorrocks, Anthony, Jim Davies, and Rodrigo Lluberas. Global Wealth Databook
2017. Rep. N.p.: Credit Suisse, 2017. Global Wealth Databook. Web. 23 July 2017.
<http://publications.credit-suisse.com/tasks/render/file/index.cfm?fileid=432759CA-0A73-
57F6-04C67EF7EE506040>.
Year Singapore Average Singapore Median Difference between mean and
Wealth (US$) Wealth (US$) median wealth (US$)
2005 125684 50624 75060
2006 148021 59532 88489
2007 186847 88420 98427
2008 182215 87169 95046

69
2009 207848 103722 104126
2010 231150 104776 126374
2011 248754 127056 121698
2012 279409 133930 145479
2013 275644 128185 147459
2014 260848 105890 154958
2015 247198 108847 138351
Appendix 3.2 -
Mortgage calculations formula (Mr. Ian) :
𝑟(1 + 𝑟)!
𝑀=𝑃
(1 + 𝑟)! − 1
where:
M is monthly installments
P is total payment
r is interest rate
n is number of installments
Calculations Conducted:
M=?
P = S$500,000
r = 0.0009
n = 12 ∗ 25 = 300
0.0009(1 + 0.0009)!""
𝑀 = 500000
(1 + 0.0009)!"" − 1
M = 1902.52

70
M=?
P = S$500,000
r = 0.0015
n = 12 ∗ 25 = 300
0.0015(1 + 0.0015)!""
𝑀 = 500000
(1 + 0.0015)!"" − 1
M = S$2070.92
To find percentage of total income monthly the following calculation was done
𝐷𝑒𝑏𝑡 𝐼𝑛𝑠𝑡𝑎𝑙𝑙𝑚𝑒𝑛𝑡𝑠
%= ∗ 100
𝑀𝑜𝑛𝑡ℎ𝑙𝑦 𝐼𝑛𝑐𝑜𝑚𝑒
Appendix 3.3 – Surendran Nair Interview (Bank of Singapore)
Questions planned to ask:
How big of an impact do property related policies have on the Singaporean
GDP?
What is the correlation between housing and the economy? Which changes
which?
How big was the impact of TDSR on the property market in Singapore?
Do you think these regulations have helped reduce the risk of the economic
crash in Singapore as seen in the US in 2008?

71
As a banker how have you seen consumer confidence change in the market due
to TDSR?
Do you think that the government should play a role in controlling the property
prices?
Do you see any major problems areas of concern in the property market in
Singapore?
Which stratas(rich/poor) of society were impacted by the TDSR policy and why?
Answers, noted down:
They are able to take the TDSR-exempt route. In the retail market there is no
way to go around it, but in the private banking sphere you have options which are
available to high net worth individuals who can apply for mortgages through this
route. The middle class face the greatest risk. They aspire to have an additional
condominium and the propensity to overspend is the highest in this bracket, not
realizing that the property prices do not always move in one direction.
You’re not going to completely weaken the currency because if you do that what
happens is your value starts to drop. So you’re going to let the Singapore dollar
gradually weaken, not allow a freefall.

72
At the same time you also gradually raise interest rates because the US is raising
interest rates. American economic movements play a large role in determining
Singaporean Monetary Policy. That’s the only way you can manage your
economy. It’s a mix, Asian currencies, US dollar, Hong Kong dollar.
I think the rationale for pegging is to what extent we are exposed to these
economies. Because of that interest rates have to go up. There is no choice in
that. There is fear that if interest rates go up and property prices remains where
they are, people cannot pay.
When people cannot pay, banks takes the property and see to cover their loan,
it’s a NPL. Many of Singapore properties are in the books of DBS, UOB and
OCBC. Smaller, more lenient banks.
If you don’t manage the leveraging on the properties and the interest rates go up,
the impact will be felt by the banks. The banks will be caught in a tight spot, their
NPLS will go up. They don’t want to take properties from Singapore and make
them homeless, and then it becomes a social problem. The TDSR is not just an
economic tool; it’s a social tool, a protection tool for the banks.
The big question is – to what extent do governments have to play a role in
managing the welfare of a country and then you do a case study of TDSR in
Singapore. It a study of government intervention through socio-economic policies
in a country, and you can use TDSR as an example.

73
Appendix 3.4
– Interview Suresh Raman (ASEAN Risk Manager at Citibank)
Questions asked:
What was the main purpose(s) for MAS to introduce the Total Debt Servicing
Ratio (TDSR) in Singapore?
Since its inception has the TDSR achieved its desired effects? What side effects
does the policy have?
Which stratas (rich/poor) of society are impacted by the TDSR policy and why?
What other policies came alongside the TDSR? How have they impacted the
property market and economy?
Before the introduction of TDSR in 2013 what percentage of the population would
have been paying over 60% of their income to cover loans?
Singapore’s interest rates have been known to be based upon the US Federal
Reserve rates. As the US increases its interest rates what is the presumed effect
on the Singapore economy and property market? How does this connect with the
TDSR policy?
Do you think the TDSR has helped reduce the risk of an economic crash in
Singapore as seen in the US in 2008?
How big of an impact do property related policies have on the Singaporean
GDP? What is the correlation between housing and the economy?

74
Do you see a similar government intervention policies entering nearby
economies in South East Asia?
In your opinion, what was the impact of TDSR on the major stakeholders in the
property market i.e. homeowners, investors. As a banker how have you seen
consumer confidence change in the market due to TDSR?
Finally, do you think that the government should play a greater or smaller role in
controlling the property prices in Singapore?
Answers:
Main thing is that in Singapore, the economy has gone up and down many times,
but one thing that keeps it going is the construction industry. When Singapore
was founded, Lee Kwan Yew’s main idea was that every Singaporean must own
a house. About 95% people own their house, which is incredible. No other
country can beat that.
In Singapore, everybody owns a house, because once you put down a down
payment. Every month is the installment is more or less funded through the CPF.
From your salary, the employer contributes 15% into your CPF. The employee
has to contribute a minimum of 5% and maximum is 20%. Most people do
between 5%-10%. If you earn a salary of S$ 5000, the employer contributes
S$750 and you contribute about $250, so $1000 is your incremental saving that
goes into your CPF every month. That can be used to fund your installments.
Every Singaporean get a property and uses his CPF for installments. So people

75
do not have to worry about their installments, as long as they have a job, they are
able to pay their monthly installments with ease.
Everyone originally bought a HDB. Then slowly they wanted more facilities and
aspired to own private properties. Then two people get together, they get
married, combine their CPF and then they were able to afford a better and in
many cases private property. This was all good for local Singaporeans. Then
people started coming from overseas. These foreigners came in with higher
salaries. They paid down payments, took 30 year loans as interest rates were
low. In Singapore land is less, in fact a lot of Singapore land is reclaimed from
sea. With land being scarce, people believe that property in Singapore will never
fall. So long as there is less space and more people, prices of property will go
up. In the US, property went up from 1928 to 2007 non-stop for 80 years. People
started believing that property prices will never drop. People believed that this
was one thing that would defy Newton’s law of gravity. Of course, we all know
how it turned out. It crashed, not because there was something wrong with the
property, but because they believed in property and started making reckless
investments even when they couldn’t afford it. No one paid particular attention to
debt servicing ration or the condition of property before buying. Singapore and a
lot of Asian countries went through a crisis in 1997 – 1999 the Asian financial
crisis. The mortgage market crashed in Thailand and Philippines. Singapore
didn’t crash but it was a wake up call for all central banks and since then they
have been tightening rules recognizing that they need to be more prudent. What

76
you are seeing in TDSR is the tail end of the regulation. Between 200-2007 was
the golden period for most countries, with economies going up. Property prices in
Singapore went up crazily, in fact prices in Singapore went up more than Hong
Kong at one point of time and much more than the rest of south east Asia.
Property is safe in Singapore, and Singapore interest rates are one of the lowest
in the region. Also geo physically nothing happens in Singapore, its in a perfect
place. No wars or disasters so people think its safe. Big money also came in from
Indonesia and other Asian countries. Since 2008 - 2009, the government starting
implementing regulations to control the prices in the market.
So if a property costs S$1000,000, I don’t need a million dollars, I only need a
down payment of 10%, S$100,000 and I start paying for it. In one years time, the
price goes up from one million to S$1.25million especially in District 9, 15, 16 etc.
In prime areas prices were increasing by 25-30%, people used to live on rent and
buy property to flip. Once you do that, you have made S$250000. Now you have
the money to pay the down payment for a much bigger property. It was very
speculative. So the Government started with stringent LTV rates, 80% for first
property. Next they asked borrowers to identify their source of funds. Then they
made the LTV 60% for second property. Next step was stamp duty. They
expanded sellers stamp duty to 16% if you sell it within one year. They were
making it difficult for people to speculate. Then they raised buyers stamp duty.
Then they implemented additional duties for foreigners and permanent residents.

77
In addition the government wanted to ensure that desperate people don’t buy,
and people don’t borrow from one bank to pay another. So TDSR became a
relevant measure, the whipped cream on the ice coffee. If I have an income of
S$10,000, I take aside all the liabilities I have. Then I should have at least 60%
left to service my loans. This is to make sure that people are not heavily
indebted. Every country has some TDSR rules, and so does Singapore. This is
for mortgage. This is different from unsecured loans. They have put in place
rules, checks and balances to control unsecured loans such as credit cards,
personal loans too. TDSR is the element on the mortgage side and on the
current side there are unsecured balances. If the sum total of all your card
balances and loans is more than 24 times of your income, then you cant get any
credit in the market.
Similar policies have been implemented throughout Southeast Asia. Thailand,
Hongkong and even Vietnam.

78
Appendix 3.5 – Monetary Authority Email
Appendix 3.6 – Interview Property Broker - Joey Tan
Transcript of most important sections
In 2013 MAS (Monetary Authority of Singapore) introduced TDSR, why do you think they
did so?
I think that the prices were getting a bit overboard la. Before it was insane price increase
and government gets worried about property bubble. If the earning member loses his
job, lower income families in debt could quickly be in big trouble.
To what extent did the TDSR actually impact property prices in Singapore? Did prices
drop due to TDSR alone or was it simply a stepping stone towards the dropping?

79
All the policies made an impact but I think that TDSR gets the most recognition in the
market. It was just a clear, bold policy that changed perspectives throughout the
property-educated individuals in Singapore.
How did the TDSR impact your work personally? In which ways?
Middle class investment decline la. I think that everyone in the market became more
vary of the situation of slowing prices. Also speculative investment decrease.
Which stratas(rich/poor) of society were impacted by the TDSR policy and why? Did it
allow more people to afford housing or was it more today with leverage and safety of the
economy moving forward?
Obviously the poor, I think that there borrowing limit decrease. The rich can still invest
easily. Most of my clients don’t need loans to be honest.

80
Appendix 3.7 – Email Interview HDB – Michelle Tay
Message Classification: Restricted
Dear Aayush
We refer to your email of 3 Aug 2017 requesting information on the Total Debt
Servicing Ratio (TDSR). Overall the policy has been considered success so far.
The TDSR framework was introduced by the Monetary Authority of Singapore,
for all property loans granted by financial institutions (FIs) to individuals on 28
Jun 2013. The policy was intended to strengthen credit underwriting practices by
FIs and encourage financial prudence among borrowers. The restrictions do not
apply to housing loans from the HDB.
To ensure that HDB flats remain affordable to buyers, HDB flats are priced with a
subsidy so that the majority of Singaporeans can afford to own a flat. In
addition, HDB provides generous housing grants for first-time buyers, with low-
and middle-income households who are buying their first home from
the HDB being able to enjoy up to $80,000 in grants.
Thank you and we wish you all the best in your project.
Regards
Michelle Tay . Executive Corporate Administrative Manager

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Preventing a Property Bubble - The Restrictions of Debt in Singapore

Unique Characteristics of Singapore’s Property Landscape …………...… 4

Analysis of market landscape Pre-TDSR

Initial Contractionary Monetary Policies and Indirect Taxes ………........... 14

TDSR Policy ………………………………………….…………...……………….. 14

Reducing Risk of Bubble Forming …….…….………...…………………….... 18

Effects on Wealth ……………………………………….…………………...……. 20

Effects on Inequality ……………………………………….…………………...… 22

Impacts on specific income earners

Works Cited ……………………………………………………………………………..... 28

Since its independence in 1959, Singapore has aspired to provide housing

houses an estimated 82% of the population, through the Housing and

world's third densest country has successfully established a consistent

capita and immigration rates (World Bank) (“Homeownership Rate” – Singstat)

(“Population Structure” – Singstat).

From 2009 to 2012, Singapore experienced rapid population growth of

(Phang, Sock-Yong) (Interest Rates – Singstat) (World Bank). The cumulative

effect of these non-price determinants of demand led to escalating property

60% of his or her monthly income (“Debt Serving Framework Introduction” -

MAS). Restricting leverage, the government aimed to secure its population’s

viewed as a success for the Singapore Government (Appendix 3.7).

An investigation of this regulatory policy from both economic and social

perspectives is essential for greater understanding of its complex impacts. This

on homeowners and prospective buyers within different economic strata’s

through the research question: To what extent have households been

impacted by the TDSR framework introduced by the Monetary Authority of

Primary and secondary research was conducted to understand TDSR and

analyse its impact on the Singaporean economy as well as the individual

households of varying income levels. The information released in government

social implications and diverse perspectives of the stakeholders. To bridge this

to collecting data from numerous sources.

At the outset, the secondary data published by the government (Monetary

Authority of Singapore, Urban Redevelopment Authority, Housing and

Development Board, and Department of Statistics), financial/economic

homeownership rate, property transactions, property price indexes, average

property market before and after the introduction of TDSR.

Primary research included interviews and surveys of citizens from different

economic strata’s and professions. Surveys provided quantitative understanding

of social views while open-ended questions and direct first-hand conversations in

Interviews with professionals including financial risk managers, private bankers,

the macro and microeconomic implications of TDSR. The new understandings

explored Singapore’s monetary, immigration and exchange rate policies within a

The concepts of supply and demand, monetary policy, risk analysis,

macroeconomic indicators and wealth inequality give visibility to the various

Unique Characteristics of Singapore’s Property Landscape

Research into a variety of property models was conducted to discern the

landscape of Singapore property, which prompted the introduction of TDSR. The

models of the western world, including Theory of Price Movements explained by

Van Order in 1982 were found to be incompetent to reflect the Singapore

property landscape due to the following unique characteristics of the urban

1. Strong capital investments and regulations imposed by the government

limit the number of property developers creating an oligopolistic informal

cartel creates an ‘indicator effect’, increasing prices in the second hand

market (Yip, Paul).

2. John Muth’s paper stated the assertion “information is scarce”(Muth,

John). With exact prices of every transaction published in newspapers and

available online, the Singapore economy is transparent (URA).

3. Unlike other property markets worldwide, the majority of residential

property in Singapore is public (73.3%), developed by the HDB (HDB).

Source : Department of Singapore Statistics. Housing and Development Board. Singapore in

Analysis of market landscape Pre-TDSR

In 2008-2012, the Singapore property market saw a ‘housing boom’ as

circumstances leading to this price explosion were:

Self created micro supply-‐demand graph. Appendix 2.3