Banks' Exposure To Property Loans 'Still Below 35% Limit'
The Straits Times
10 July 2007
The overall exposure of Singapore banks to property-related loans taken out by investment buyers and financial institutions amid the property boom is rising. But experts are not worried. A new Citigroup report says the percentage is set to climb from 27% of total loans currently to 'closer to 30%' by year-end.
But this is 'still comfortably below' a regulatory limit of 35%, it said. Foreign banks may be nearer to the limit than local ones, said Citigroup economist Chua Hak Bin yesterday.
All these figures exclude property loans taken out by owner-occupiers - about 80% of all bank loans.
If banks approach the limit, customers could be charged higher interest rates for investment- related mortgages compared to owner-occupied ones, suggested Dr Chua.
Mr Paul Kwee, Citigroup Singapore's corporate bank director and head of real estate, noted: 'In view of the recent increase in lending activity, it may well be that certain banks have less appetite, and may become more selective in granting loans, as well as in reviewing the terms that go with the loans.'
Dr Chua also pointed out that while speculative buying of property has risen and may climb further over the next few years, it is still well below the level seen in the property boom of the mid-1990s.
So bank-loan exposure to the property sector 'is likely to remain within tolerable limits'.
In May, about 25% of mortgages taken out by investment buyers and 33% of loans to financial institutions were property-related, estimated Citigroup. This works out to an overall property-related loan exposure for the banking sector of 28.7%, well below the 35% limit.
The limit was introduced by the MAS in May 2001, as a safeguard to limit the risks of the banking system's exposure to property loans, especially speculative activity.
But Dr Chua expects 'mortgage growth to accelerate' to near 30% in the next 6 months, as more new property projects are completed and some homebuyers on the deferred payment scheme apply for loans.
A higher proportion of new mortgages are likely to be investment-related, given the 'already high home ownership in Singapore of about 93%'.
OCBC Bank has seen the ratio of new applications for investment properties to owner-occupied ones rise, but the latter is still the 'key driver of overall sales', noted head of consumer secured lending Gregory Chan.
DBS Bank and Maybank said about a fifth of their Singapore mortgages are for investment properties, while Standard Chartered Bank said the percentage is between 15 and 20%. The rest are owner-occupied ones.
A Maybank spokesman argued that 'there is no direct relationship between loan rates and the 35% limit'. The pricing of mortgage rates and corporate loan rates depends on a combination of factors, such as the risk profile of the borrower, the purpose of the loan and the type of property mortgaged, she said.
In his report, Dr Chua also noted that property speculation may have increased, as reflected in the rise in sub-sale deals to about 10.5% of total transactions for the April to May period, compared with about 3% 3 years ago. But this is still much lower than the 1990s peak.
More Expats Buying Homes As Rents Jump 35% In First Half: Analysts
9 July 2007 2126 hrs
Rising rentals in Singapore have led to more expatriates buying properties here.
Property market watchers say a growing number of foreign executives are choosing to trade off living in upscale locations for bigger properties outside the city area and home ownership.
According to some calculations, average rents in Singapore went up by 35% in the first 6 months of this year over the same period last year.
This is causing expatriates to move to cheaper districts.
And anecdotal evidence is suggesting that of late, more are thinking of buying their flats.
Nicholas Mak, Consultancy and Research Director, Knight Frank, said: "Another group of expatriate tenants are actually considering buying properties - either buying the apartments they are renting, ... or considering asking for their rental package - their housing accommodation package - to be paid as a lump sum so that they can use that to purchase a home, maybe even a landed property."
Flats in prime districts now rent for an average of S$3.26 per square foot a month, while those just outside of the central areas are letting for $2.30 per square foot a month.
The districts of 9, 10 and 11 may be rental hotspots for most higher-end expats.
But analysts say those seeking to buy tend to go for the upper-mid level properties between 15 to 20 years old in outlying areas like Clementi, Toh Tuck and even Loyang and Pasir Ris.
Such expats, some of whom are permanent residents, typically have a budget of just over a million dollars.
Donald Han, Managing Director, Cushman and Wakefield, said: "We've actually started to see out of 10 expatriates that we serve, at least one will be looking into either leasing or potentially even buying. And quite a fair bit of those will ultimately decide to purchase rather than lease. Typically they'll look into the fringe of Districts 9, 10, and 11.
"They will look into properties which are not the top end, more into the upper-mid level, potentially within the S$800 to as much as S$1,200 psf. And the units could be of the size of one- to two-bedroom kind of apartments. For landed property, typically perhaps a District 21, landed terrace houses which might go in the region of a million to S$1.2 million."
Property market watchers say the upward pressure on rental prices is unlikely to let up over the next 12 months.
Mr Mak said: "Private home rentals are still going to face a lot of upward pressure for the rest of this year and probably for the first half of next year. This year alone, we could easily see average rentals go up by anywhere from 15% to even as much as 25%."
Mr Han said: "Rental will continue to rise by virtue that it's really a landlord's market. I suspect rental in the next 12 months will probably continue to rise between the range of about 20% to 25% from current levels."
This comes as demand continues to grow and collective sales aggravate the already limited supply available.
Re: Southbank (D7, Leasehold, UOL Group)
No wonder people keep telling me the expats and foreigners are here cos they can't make it in their own countries. So stupid to jump into a hot pool now. Pay so high. Locals, stay back. Let the show begins. It's a comedy. It's a tragedy. On the foreigners.
Re: Southbank (D7, Leasehold, UOL Group)
Originally Posted by Unregistered
Let the show begins? What show?
See your stupid clown acts?
We need these FTs.
We don't need you idiot!
SOUTHBANK @ LAVENDER VS DAKOTA RESIDENCES
southbank does not much publicity. Why? Isn't Southbank @ Lavender a better buy compared to Dakota Residences in terms of view, proximity to MRT station, proximity to Kallang Bay Area & CBD, height of the development (Max 40 storeys), design of development (like Canary Wharf in London), address, etc. Price is comparable if not more value for $? The last $psf in June caveat sale was just over $1000.