http://www.straitstimes.com/archive/...perts-20131205

Home loan growth could slow as sales weaken: Experts

Published on Dec 05, 2013

By Melissa Tan


HOME loan growth is expected to slow further this quarter amid weakening residential property sales, analysts said yesterday.

However, prices are likely to remain elevated until at least the middle of next year despite several rounds of property cooling measures in recent years, they said.

The central bank said on Tuesday that home loan growth here had slowed, and the number of borrowers with unreasonably high levels of housing debt had improved after the measures.

It also pointed to high price levels, and said it would step in to ensure stability and sustainability in the property market if necessary.

Analysts said the loan growth slowdown is to be expected in the wake of tough loan curbs imposed in June under a total debt servicing ratio (TDSR) framework. The TDSR stops banks from issuing a loan that pushes a borrower's debt repayments above 60 per cent of his gross monthly income.

The Monetary Authority of Singapore (MAS) said the credit profile of housing loans had improved, and cited a smaller share of new housing loans with a loan-to-value ratio above 70 per cent. This ratio is the proportion of a home's value that a buyer can borrow.

That share has dropped from a high of 77 per cent in the second quarter of 2010 to stabilise at 66 per cent since last year. MAS said the portion of loans in which the homes are worth less than the mortgage - or in negative equity - also remains negligible.

Knight Frank research head Alice Tan said the improved loan statistics were a reflection of the effectiveness of the TDSR in limiting debt exposure.

Loan growth could moderate even further this quarter owing to declining sales volumes, she said.

PropNex Realty chief executive Mohamed Ismail agreed. "Debt ratios and loan volumes will significantly drop. The slew of measures are really biting; the final nail was TDSR, and that has taken the wind out of the market's sails."

Mr Ismail believes resale volumes will fall in both the public and private housing markets this quarter from last quarter.

UOB Kay Hian equity analyst Vikrant Pandey said overall home sales volumes could fall about 30 per cent this year from last year.

While the overall price index is expected to rise by up to 2 per cent this year from last year, the index may fall by 5 per cent to 10 per cent next year, he said.

MAS said on Tuesday that "momentum has varied across different market segments". It noted that while private home prices in suburban areas have climbed 2.5 per cent every quarter on average this year, prices on the city fringe and in the city centre have started to show some weakness, turning negative in the third quarter.

Ms Tan said that while suburban private home prices will fall at some point, any drop would probably be seen only around mid-next year as developers need time to adjust their prices, unit layouts and marketing strategies.

Mr Pandey said suburban sale volumes have held up so far, as their total prices tend to fall in the "affordability sweet spot" between $700,000 and $1.4 million.

But Mr Ismail said suburban prices are likely to stay elevated for the whole of next year, as some developers are still placing high land bids, which contribute towards a higher selling price.

Developers tend to take 10 to 12 months to launch a project on land won in state tenders.

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