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Housing loan growth drops to seven-year low

Posted on 5 Dec 2014 | Comments Off

Housing loans in Singapore grew at 6.4 percent year-on-year in October – or its slowest pace in seven years – on the back of a weak property market as well as a higher base, said Maybank Kim Eng and reported in the media.

“Industry domestic banking unit (DBU) loans grew nine percent year-on-year in October, down from 10.6 percent a month earlier. Business and consumer loans grew at their slowest pace in four and seven years respectively. The former’s slowdown was led by lending to general commerce (+12.3 percent year-on-year), transport, storage & communication (+13.5 percent) and financial institutions (+15.4 percent),” it said.

“The latter’s deceleration came about as property-market sentiment remained poor. But as we had toned down our loan-growth expectations after Q3 2014 results, especially for DBS, there is no need to revise numbers just yet.”

Looking ahead, Maybank Kim Eng does not expect 2015 to be any better as demand will mainly come from drawdowns for newly completed houses sold in 2012 to 2013.

“As Singapore deposits grew just 0.2 percent month-on-month and 1.5 percent year-on-year, Singapore loan-to-deposit ratio (LDR) may not stir next year. This is because loan growth could decelerate further. Deposits may not grow strongly as holding cash remains unappealing amid low interest rates. October’s SGD LDR was 86.4 percent,” it added.

With this, Maybank Kim Eng expects loan growth to average nine percent in 2015.

“On the domestic front, home loans should expand just four to six percent, without a property-market revival. However, we believe their slack will be taken up by better business loan growth of 10 to 12 percent.”

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Posted in Loan / Mortgage / Finance

Tagged Housing Loans, Industry domestic banking

UOB’s non-performing housing loans hit 10-year high

Posted on 18 Sep 2014 | Comments Off

UOB’s non-performing housing loans soared to 34.2 percent in Q2 2014, or its highest level since Q4 2004, reported the media.

The sharp spike surprised Maybank Kim Eng given the perception that UOB is one of Singapore’s more conservative home lenders, with only a slight year-to-date correction in Singapore’s house prices.

“We understand its NPLs were isolated to a group of borrowers who had invested in Turquoise, a high-end condominium project in Sentosa,” said Maybank in a report.

URA data showed that two units there changed hands in Q2 2014 at 45 percent discount to their launch prices.

The report noted that the transactions “stoked fears that it is a matter of time before default cases become widespread, undermining Singapore banks’ profitability that has been propped up by low charge-off rates.”

To ascertain sentiment on the Sentosa micromarket, Maybank examined recent transactions of non-landed properties there.

It found that there are nine condominium projects in Sentosa. The first four, launched during the nascent recovery of Singapore’s property market in 2004 to 2005, had an average selling price of below $1,600 psf, while the remaining five, which were launched later, were priced above $2,600 psf.

“In our view, the large losses at Turquoise can be partially explained by the project’s higher launch price,” said Maybank.

Notably, Turquoise’s launch price of $2,605 psf is about 75 percent higher than the average price at The Oceanfront ($1,360 psf) and The Coast ($1,592).

“These two were launched one year ahead of Turquoise. This could mean that higher-priced projects at Sentosa are at greater risk of a price correction,” said the report.