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MAS Warns Singapore Homebuyers of Expected Interest Rate Hike
Home buyers need to be “cautious” when taking out new mortgages as interest rates are expected to rise, the Singapore Monetary Administration (MAS) said in a Dec. 6, 2021 Financial Stability Review.
He also advised not to accept new loan commitments for high-income households.
According to the report, household debt in Singapore has exceeded pre-pandemic levels.
As a share of gross domestic product (GDP), household debt was 70 percent in the third quarter of 2021, up 3 percent from the fourth quarter of 2019.
Over the past year, the total value of household debt in Singapore has increased by 6.8%, which is explained by an increase in housing loans due to rising housing prices and the volume of transactions.
Despite the economic downturn during the pandemic, rising property prices are now being observed in many parts of the world.
According to the International Monetary Fund’s housing price index, housing prices in Luxembourg increased by 17% in 2020. Last year, annual home price growth in the U.S. was about 8 percent.
Private property prices in Singapore rose 7 percent in the third quarter of 2021 from a year earlier, according to the City Reconstruction Authority.
According to MAS, the average number of quarterly transactions since the beginning of 2020 is 20 percent higher than the average in 2017 and 2019, which is explained by the demand for both new homes and resale.
In the context of low interest rates, large-scale fiscal and monetary incentives, and pandemic-related construction disruptions, tight supply is based on rising real estate prices relative to incomes in developed and emerging market economies.
The central bank also noted the risk of a “sharper-than-expected” monetary tightening, which could lead to a “sharp and erratic revaluation of assets” if inflation remains consistently above the set target.
“Unsustainable growth in housing prices poses a risk of a sharp correction that could undermine household wealth and bank loan portfolios,” the MAS warned.
In Singapore, 40 percent of household assets and 75 percent of liabilities consist of residential property and loans.
A downturn in the real estate market could suppress domestic demand as property becomes larger on the household balance sheet.
At present, the total net wealth of households is about 4.6 times the GDP, which is a slight increase compared to 4.4 last year, as the increase in the value of financial and property assets exceeds the growth of liabilities. is a program.
The stress test showed that if income decreases by 10 percent and the interest rate rises to 250 basis points, the average household can meet its loan obligations.
However, the financial condition of central bank households, especially for the vulnerable, has been hampered by possible failures in growth or “inaccuracies in the timing, pace and sequence of cancellation of support measures”. settings may be under pressure due to policy.
Source: https://worldnationnews.com/mas-warns-singapore-home-buyers-of-an-expected-interest-rate-hike/