Tag Archives: Financial Services

Household debt soars due to high home prices

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

Singapore property to remain resilient

Singapore’s domestic-driven sectors such as construction, real estate and related financing are expected to remain resilient, according to a central bank report.

“The level of output in the economy will further converge to its underlying potential, while the labour market remains at full employment, in part reflecting supply-side constraints,” noted the Monetary Authority of Singapore (MAS).

There are also potential risks in the external economy, while pressure from economic restructuring could result in higher business costs in the country.

MAS maintained its consumer price index inflation forecast at three to four percent, while core inflation is expected to range between 1.5 and 2.5 percent.

Meanwhile, Singaporeans were slightly more optimistic about the economy, especially in job prospects and personal finances resulting in the rise of spending intentions, according to a Nielsen study.

Singapore’s consumer confidence index rose a point to 96 points in Q1 this year from the previous quarter. However, it is at the same level compared to Q1 2012.

“Our latest survey results show that consumers in Singapore are feeling slightly more upbeat about their job prospects, personal finances and the future recovery of the economy. The strengthening consumer outlook was also reflected in spending intentions,” said Luca Griseri, Head of Financial Services at Nielsen for Singapore and Malaysia.

Source : PropertyGury – 2 May 2013