Household net worth grows further in Q2, rising 8.9% as liabilities fall

Mortgage liabilities continue to taper off amid higher interest rates

Sep 06, 2023

SINGAPORE households’ net worth continued to grow in the second quarter of 2023, despite a slowing housing market weighing on residential asset values. This came as household debt dipped further, with mortgage loan value falling off amid the current higher interest rate environment.

According to data from the Singapore Department of Statistics, household net worth – that is, assets less liabilities – rose 8.9 per cent year on year to S$2.7 trillion at the end of Q2 2023. This outpaced the increase in Q2 2022, which came in at 7.5 per cent. In Q1 2023, the figure was 8.2 per cent.

Total assets, which comprise financial assets and residential property assets, rose 7.6 per cent to S$3 trillion in Q2 2023 over the year-ago period; this is roughly the same rate as the 7.2 per cent increase in Q1.

Overall asset value was weighed down by a slowdown in the growth of residential asset values, which climbed 9.1 per cent year on year to S$1.3 trillion. Prior to that, residential properties on household balance sheets had posted double-digit increases – around 11.7 per cent in Q1 2023 and 12.1 per cent in Q2 2022.

Singstat figures also indicate that residential properties made up around 43 per cent of household assets as at the end of Q2. This is a slightly smaller share of the pie than in the previous quarter, when they accounted for 44.1 per cent of household assets.

The remaining household assets of around 56 per cent were held in financial assets, which comprise deposits, stocks and life insurance.

Financial asset values stood at S$1.7 trillion as at the end of Q2 2023, with growth nearly doubling to 6.6 per cent from the previous quarter’s 3.8 per cent increase. It also surpassed the 3.7 per cent increase in Q2 2022.

Industry watchers attributed the jump to a lower base in earlier quarters, with the market now correcting. In Q2 2022, for instance, shares and securities had dropped by 4 per cent to 5 per cent quarter on quarter to S$244.1 billion. As at the end of Q2 2023, it stood at S$270.1 billion.

Sing Tien Foo, provost chair professor of the Department of Real Estate at the National University of Singapore, added that the increase – which was “quite a big jump”, given its relatively larger base – could also be due to a strong stock market, which tends to be much more volatile than the real estate market.

Meanwhile, the slowdown in residential asset values mirrors the recent dip in private home prices, which fell 0.2 per cent in Q2 this year – the first decline in three years. Year on year, private home prices still rose 7.5 per cent.

Public housing prices, on the other hand, rose by 1.5 per cent quarter on quarter. On a yearly basis, they grew by 7.5 per cent.

Prof Sing noted that residential asset values are probably derived from new home sales, which may explain the difference in its growth and that of the Urban Redevelopment Authority’s overall price index.

The value of residential assets in the household balance sheet is therefore not necessarily reflective of overall home prices. Home prices have risen in the past few months, even as transaction volumes dwindled, so their aggregate value may still be higher, he said.

Meanwhile, Singapore’s household liabilities fell some 1 per cent year on year to S$359 billion in Q2 2023, after a 0.05 per cent decline in the prior quarter.

Household liabilities comprise mortgage loans and personal debt, such as car loans and credit card bills. Growth in mortgage debt has tapered off in the past few quarters, rising 1.8 per cent year on year to S$264 billion in Q2, from the 2.5 per cent rise in Q1 2023. It is also less than half the 4.8 per cent increase in Q2 2022.

This shows that households are cutting back on debt, partially due to higher interest rates, said Alan Cheong, Savills Singapore’s executive director of research and consultancy.

He added: “It shows that households have the ability to pay off their mortgages because their cash position from previous quarters is strong… (They) would rather do so than incur debt expense that goes into the cost of their home purchase.”

While Singapore households’ balance sheets remain healthy, Cheong pointed out that liquid assets – derived by adding current assets and Central Provident Fund items in the balance sheets – may be a better indicator of households’ ability to purchase a new property or invest in real estate.

“To buy another property, you will need the cash, so the cash (in the household balance sheet) is what matters most,” he said.

With mortgage debt tapering off, Prof Sing noted that this also indicates banks are giving out fewer or lower loans.

“The loan quantum is correlated with transaction activities, (and) given that the loan-to-value ratio remains unchanged… (that means the) loan quantum will come down when sale volume and prices drop,” he said.

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