Singapore private home prices to rise 2% in 2020, 2021: Fitch Ratings

Over the next two years, it predicts that the housing NPL ratio will increase slightly, but remain low at 0.4% to 0.5%

Thu, Dec 19, 2019


PRICES of private homes in Singapore are expected to show modest growth over the next two years, rising by about 2 per cent in both 2020 and 2021, down from nearly 8 per cent in 2018. This is according to the Fitch Ratings' Global Housing and Mortgage Outlook 2020 report on Wednesday.

"We expect home price growth to reflect the recovering real GDP growth rates of 1.5 per cent in both 2020 and 2021, after growth decelerated to 0.6 per cent in H1 19," Fitch said.

From Q3 2018 to Q1 2019, private home prices declined 0.7 per cent, due to regulatory tightening and mortgage rate increases, which dampened market sentiment. However, property prices rebounded slightly in Q2 2019, and Fitch is projecting "minor growth" for the rest of the year.

It said improving borrower affordability, as household incomes grow faster than home prices, as well as lower interest rates will also contribute to rising property prices. But Fitch added: "If the government views home prices as rising more than is justified by economic fundamentals, we expect that the government would again cool the market through macro-prudential measures."

Over the next two years, Fitch predicts that the housing NPL (non-performing loan) ratio will increase slightly, but remain low at 0.4 per cent to 0.5 per cent, thanks to improving household debt to income ratio. "Mortgage performance will also be supported by continued low unemployment of about 2 per cent in 2020 and 2021," it added.

In addition, it does not anticipate a mortgage rate increase in the near future, which would support borrowers' ability to pay. Mortgage rates rose rapidly to 2 per cent at the end of H1 2019 due to a sharp rise in the benchmark rates such as the three-month Singapore Interbank Offered Rate or Sibor. However, Singapore's benchmark rate has started to decline following a series of three rate cuts by the US Federal Reserve starting from July this year.

Looking ahead, Fitch forecasts mortgage lending growth to remain subdued in the near term. "After a projected small decline of 0.5 per cent in 2019, we expect 2 per cent annual growth in each of 2020 and 2021 in line with improving market sentiment," it said. The lending growth slowdown in 2019 reflected the increase in additional buyer's stamp duty and tightening of LTV (loan-to-value) limits in July 2018.

That said, the growth is expected to remain limited, reflecting expectations for a slowing annual population growth of below one per cent, and the high likelihood that the government would apply cooling measures if home prices show signs of overheating, the rating agency noted.

Earlier this week, BT also reported that Singapore's private housing market is poised for modest price growth next year, amid a resilient leasing market. This comes even as developers are expected to continue being challenged by the significant supply of unsold private housing units.