Fewer buying overseas properties as rate hike looms

A sobering mix of property curbs, a softening economy and the prospect of higher interest rates seems to have cooled the Singaporean fervour for property, both at home and abroad.

On the home front, the growth in outstanding property loans moderated and the volume of new loans shrank considerably.

Overseas, Singaporeans bought about $1.1 billion worth of residential properties in the first half of this year, down from about $1.6 billion in the same period last year, the Monetary Authority of Singapore (MAS) said.

For the whole of last year, Singaporeans had snapped up $3 billion worth of overseas homes, up from $1.9 billion in 2012.

“Nonetheless, real estate agencies in Singapore have seen increased interest in overseas property purchases, from across a broader spectrum of Singapore buyers,” MAS said in its Financial Stability Review yesterday.

Properties in Britain, Malaysia and Australia accounted for 91 per cent of total transactions by value in the first six months of this year and 76 per cent by number, MAS said. Singaporeans also bought homes in Japan, the Philippines and Thailand.

The data is based on an MAS survey that collected figures on overseas properties transacted by real estate agencies in Singapore.

Mr Getty Goh, director of property research firm Ascendant Assets, said he has seen a pullback in the number of Singaporean clients committing to foreign property this year.

“The market is less certain these days with things like stimulus tapering taking effect in the United States and an interest rate hike coming up,” he said. “On top of that, local investors see the Singapore market cooling and so they are actually saving their bullets as they anticipate that at some point they may want to re-enter the Singapore market when prices come down enough, rather than commit to an overseas property now.”

Despite the strong take-up of foreign homes over the past few years, local banks’ exposure to foreign property loans remained low, MAS said, comprising less than 2 per cent of their total housing loan books.

At home, property cooling measures have tempered the growth of outstanding housing loans, it noted. At its peak, the volume of outstanding property loans grew 23 per cent year on year in August 2010. But in September this year, outstanding property loans grew just 6 per cent from a year ago.

The volume of new housing loans, which generally track housing transactions, contracted from $11.4 billion in the second quarter of last year to $6.7 billion in the third quarter of this year.

Singaporeans are also more prudent when taking out loans. For example, the average tenor of new private housing loans has declined, from 30 years in 2012 to 25 years in the third quarter of this year.

A slight uptick in the banks’ non-performing loans (NPL) ratio from 0.28 per cent to 0.36 per cent between the first and third quarters of 2014 was due to “a handful” of defaults for high-end housing projects, MAS said.

United Overseas Bank said in its third-quarter results last month that its overall NPL ratio held steady from a year ago, but the value of bad housing loans as a share of its housing loan book had risen. Still, investor relations head Jimmy Koh said: “Even with a possible rise in the interest rate environment, no material deterioration is expected.”

OCBC said last month non-performing housing loans rose 20 per cent from a year ago, but the ratio of such loans to its total mortgage book fell to 0.5 per cent from 0.6 per cent a year ago. DBS’ third-quarter housing NPL was 0.2 per cent, down from 0.25 per cent a year ago.

http://business.asiaone.com/news/fewer-buying-overseas-homes-rate-hike-looms

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s