Home Loan Growth Hits 29-Month High

Source : The Straits Times, Oct 1, 2007

HOME loans shot up at the fastest pace in over two years as en bloc sellers bought existing properties and foreigners opted to buy instead of rent.

Home loans in August expanded 2.6 per cent compared to the previous month, and grew 10.7 per cent from the same period a year ago, according to monthly data released by the Monetary Authority of Singapore (MAS).

The 10.7 per cent rate is the fastest in 29 months. This is the first time in over two years that it has entered double-digit territory. July's growth figure was 8.1 per cent.

Bankers noted that one big factor driving mortgage growth was the growing number of borrowers who, having cashed in on en bloc deals, snapped up replacement properties, especially on the outskirts of the central part of Singapore.

One local banker noted that the average size of mortgages taken out in August dipped, possibly because some borrowers flush with cash from en bloc sales were taking out smaller loans or had downgraded to smaller homes.

Another group of borrowers were foreigners who had previously leased properties but were now opting to buy their own homes, given how high rentals have climbed.

Foreigners 'are still interested in buying properties in district 9, 10, 11 and the central area', said Standard Chartered Singapore general manager for mortgage and auto loans Elaine Heng.

But some, such as Chinese and Indian nationals, have shown more interest in district 15 (Katong, Joo Chiat and Amber Road area), as well as other areas on the outskirts of the city, she added.

The amount of home loans held by banks grew by $1.77 billion in August, making up a total of $69.1 billion of mortgages on their books.

Total lending for August grew 10.8 per cent compared to a year ago, as stronger mortgage and credit card growth offset a decline in building and construction loans.

Analysts expect home loans growth to pick up further in the third quarter of this year and beyond. They point to more home buyers on deferred payment schemes taking up loans, as the date of completion of their developments draws near.

But bankers say that the robust home loans growth is currently driven more by secondary market sales of existing properties, which make up about 60 per cent of total transactions.

Stanchart's Ms Heng said monthly home loans growth could continue at this 10 per cent rate in coming months provided market sentiment remains positive.

But some investors and potential home buyers may adopt a 'wait-and-see attitude' from how the United States sub-prime mortgage crisis pans out, she added.