Local banks face risk exposure to home loans – Channel New
July 02 2011
SINGAPORE : Mortgage loans have been a major driver of the loaning business for the 3 local banks, though they can in addition be a drag in the occasion of a downturn in the property market, in accordance with worldwide obligation watcher Fitch Ratings.
Fitch Ratings valued that mortgages and construction-associated loans account for Fifty Per Cent, or perhaps fifty percent, of the 3 local banks’ total loan books.
The most recent figures from the Monetary Authority of Singapore demonstrated that housing loans rose Twenty Two Per Cent year-on-year to S bucks 118 billion in April.
Consequently, local banks may face stress if the property market begins to soften, as that may cause their balance sheets to take a hit.
Alfred Chan, boss for economical corporations, Fitch Ratings, said: “50 Per Cent of Singapore financial loans are to the property sector in the type of mortgage loans and construction loans.
“So in the occasion that price tags were to moderate, given that price tags are quite high at where they’re now, that can have an effect on the quality of those loans.”
Fitch, though, points out that the authority’s move to cool the property market should help lessen that risk.
Those cooling measures will assure that obligees will get to hold in their books only debtors with great credit quality.
Mr Chan said: “From the top line viewpoint, it is going to be tighter. Though from the risk viewpoint, the potential for delinquencies in addition tends to (be lowered). So from a net-net base, it is usually positive for the banks.”
Though, they added that the fallout from the Eurozone setback can hit Singapore’s property market.
Dr Chua Yang Liang, head of study & consultancy, Jones Lang LaSalle, said: “I do not think there is a bubble making. It formed earlier on, though it has been held in control, given the policy measures.
“And going forward, I think as far as you hold the cost movements stable, transaction volume steady, it must be fairly sustainable.”
He added: “The risk would mainly emanate from exterior, downside risks – right now are, I would think, the European issues with the Greek economy, the sovereign risk conditions there that can probably rock the economical market further. That may effect the property market here.”
Different analysts said the risk exposure to mortgage loans can be offset by the great evolution in corporative loans, which grew 24.3 Per Cent year-on-year to S bucks bucks 193 billion in April.
Jones Lang LaSalle anticipates the rise in housing property price tags to slow to a rate of between 0 and 1.5 Per Cent for the rest of the year, or perhaps at a full-year average rate of Five to Six Per Cent – a much quicker pace than in the first fifty percent of the year.