Tuesday, February 1, 2011

Mortgages steal show as bank lending grows

MORTGAGES are still powering the growth in bank lending although analysts reckon that blistering housing sales will taper off soon once the cooling measures bite.

While a slowdown is expected, the story now is of huge loans growth, in both the commercial and residential sectors.

Total loans by banks - foreign and local - grew to $322.7 billion in December, from $281.3 billion in the same period a year ago, according to the Monetary Authority of Singapore (MAS) yesterday.

Business loans were up 11.7 per cent over the same period in 2009, helped by companies in the manufacturing, building and construction and general commerce space hitting a higher gear.

Housing-related loans rose to an estimated $112.4 billion in December from $111 billion in November.

The jump in mortgages was even more significant on a year-on-year basis, up 23 per cent over December 2009.

This is not surprising given that private home prices climbed 17.6 per cent last year, with the sale of a record 16,292 new homes.

Hot on the heels of the August property cooling measures, the Government recently announced new rules that raised the seller's stamp duty on properties to as much as 16 per cent of the sale price if the home is offloaded within a year.

The amount banks can lend on a second property has also been lowered to 60 per cent of the home's value.

DMG analyst Leng Seng Choon expects housing loans to slow as resale transaction volumes soften.

He said the new residential property loans will take time to 'filter through the system', as the Temporary Occupation Permit dates could be around three years later and the drawdown for these loans would continue over the next few quarters.

'However, we expect the private resale market to see some slowdown in transaction volumes going ahead, due to the government measures. This could lead to loans growth slowing from 2011 onwards,' he said.

Bankers, speaking on condition of anonymity, said that some customers had even been forgoing their option to buy in some newer developments.

Deutsche Bank analyst Andrew Hill said in a report last month that 'although the latest action to cool the residential property market shouldn't come as a great surprise, it will likely dampen sentiment towards the banks near-term'.

He said that in the month following the August measures, banks under-performed the Straits Times Index by 5per cent. UOB shares were the most affected, with a fall of 8 per cent, while DBS' and OCBC's fell by 3 per cent.

Phillip Securities analyst Magdalene Choong estimated that housing loans comprised 29 per cent of UOB's loan book. This compared with 25.3 per cent for DBS and 25.4 per cent for OCBC.

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