Friday, April 1, 2011

Housing loans grow at slowest rate in a year

THE growth of housing loans has sunk to its lowest level in 12 months.


But analysts say a bigger dip may be on the way as they believe the full impact of January's property cooling measures is yet to be reflected in the latest numbers.


The total value of outstanding mortgages as at the end of February rose 0.95 per cent to an estimated $115.3 billion, from $114.2 billion as at the end of January.


This was the lowest month-on-month growth rate since February last year. The highest growth rate in recent times was 2.62 per cent in June last year.


It is also quite a bit slower than January's 1.61 per cent monthly growth.


CIMB analyst Kenneth Ng said most of the effects of the January market cooling measures on mortgage numbers are likely to be seen only next year.


HSBC Singapore head of personal financial services Greg Zeeman said: 'The effect of the cooling measures may be evident only later as the data captures home loans booked two to three months ago.'


These monthly loan numbers could also be hit by seasonal factors in Chinese New Year. In February last year, month-on-month growth was 0.93 per cent.


Total bank lending rose a stronger 1.6 per cent to $334.2 billion in February from $328.8 billion in January, according to Monetary Authority of Singapore (MAS) figures released yesterday.


Analysts believe one factor in the slowing rate of home loans' growth is an easing in the number of resale transactions as a result of the latest round of property cooling measures unveiled on Jan 13.


Only months after an earlier round of measures in August, the Government introduced fresh measures including a raising of 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 measures appear to have cooled the previously red-hot market.


Sales of new private homes in February fell 9 per cent from January to 1,101 units, according to the Urban Redevelopment Authority. The data showed that when executive condos - a public and private housing hybrid - were included, February sales came in at 1,228, a 21 per cent fall from January.


Singapore's three local banks, with a combined 60 per cent share of the home loans market, all said at recent full-year results briefings that the number of new home loan applications has fallen.


Other big mortgage players here like Standard Chartered Bank (Stanchart) are also seeing the housing market soften.


'Many buyers have adopted a 'wait and see' attitude, especially since the new rules, in anticipation of declining property prices,' said Mr Alvin Lee, Stanchart Singapore's head of mortgages.


Analysts say the latest housing loans growth figure is still in positive territory, mainly thanks to continued strong draw-downs on loans granted by banks prior to the latest cooling measures.


In other words, the number of new mortgages may have declined but there is a 'lag effect' before the paying down of existing loans outpaces the disbursements of new ones. When that happens, the total figure will become weaker.


'The fact that home loans are still rising reflects the strength of the housing market in the last two years,' said Kim Eng analyst James Koh.


Market watchers say the rock-bottom mortgage rates offered by many banks are helping to support the market.


United Overseas Bank, for example, has just launched a new promotional package pegged against its board rate with first-year rates at 0.68 per cent and second-year rates at 1.38 per cent. It has a two-year lock-in period penalising any premature exit from the package.


The 0.68 per cent figure is said to be the lowest in the industry.

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