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Household debt soars due to high home prices

Posted on 28 Jun 2013 | Comments Off

The rapid rise in Singapore’s household debt, coupled with high residential prices, could make the city-state vulnerable to asset deflation, a reduction in income and a rise in unemployment if there is a slowdown in global economic markets, according to UBS Wealth Management.

Singapore’s household debt, or the overall consumer loans lent by local banks, reached 279 percent of the overall GDP for Q1 2013, up from 177 percent during the same period in 2007 and 198 percent in the first quarter of 2009 following the 2008 financial crisis.

Notably, 80 percent of the household debt in Singapore is accounted for by housing loans and is why it rose sharply from 2007 as a result of spiralling property prices since 2009, noted Kelvin Tay, UBS Wealth Management’s Regional Chief Investment Officer for Southern Asia-Pacific.

“With (household debt) at such significant levels, it will be difficult for the government or policy makers to stimulate demand to offset the sluggish exports we are currently experiencing.”

This situation has been worsened by panic selling of risk assets like Asian local currency bonds and US high yield bonds, which was triggered by signs that the US Federal Reserve will scale-down its third round of quantitative easing (QE3).

“Given the sharp rise in credit growth over the last few years, I would not be surprised if an increase in interest rates is followed by deterioration in the loans portfolio of banks and other financial institutions; this would in turn lead to a tightening of credit supply and a higher cost of financing for credit in general,” Tay added.

Source – PropertyGuru – 28 Jun 2013

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Posted in Loan / Mortgage / Finance

Tagged Consumer loans, Federal Reserve System, Financial Services, Household debt, Housing Loans, Singapore, UBS Wealth Management

Bank lending dips 0.1% in July to $272b

Posted on 1 Sep 2009 | Comments Off

Consumer loans rise despite drag from building and construction loans

BANK lending eased in July, reversing a modest increase in the previous two months, as a drop in building and construction loans ate into a continued rise in consumer housing loans.

But economists say that the drop in loans for construction is more likely a blip than the start of a worrying trend.

The total amount of Singapore-dollar loans held by banks here dipped 0.1 per cent over the month to $271.8 billion at end-July, estimates from the Monetary Authority of Singapore show. This followed an expansion in overall bank lending of 0.5 per cent in June and 0.3 per cent in May, which fuelled optimism that credit demand and supply could be recovering.

Compared with a year earlier, total loan volume at end-July was still 2.3 per cent higher.

Loans to businesses fell for a ninth straight month, to $151.8 billion at end-July, 1.1 per cent lower than at end-June.

The drop in business loans to the building and construction sector was the main reason for the fall. Outstanding loans to the sector shrank by $1.3 billion, or 2.6 per cent, over the month to $48.8 billion at end-July – the lowest level since end-September last year. Continue reading →