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THE cooling measures in the property sector have had a clear drag on demand in housing loans, yet private home prices simply have not fallen enough, data from the Monetary Authority of Singapore (MAS) suggested on Thursday.
This likely backs the government's case for keeping the regulations in place - despite calls from the property industry to relax certain measures - particularly as the banking industry appears to be able to handle potential stresses in the market.
Prices in the private housing market have declined for four consecutive quarters, by a cumulative of nearly 4 per cent since the fourth quarter of 2013 (view infographic).
As a result, household wealth in Singapore - which is close to S$1.5 trillion - rose just 1.4 per cent in the third quarter compared to a year ago, slower than the five-year average rate of 7.9 per cent per annum.
Still, the lower prices compare with a 62 per cent jump in prices from the post-crisis trough in the second quarter of 2009.
"While prices have moderated following the series of property measures introduced since 2009, they remain at an elevated level," MAS said.
The Real Estate Developers' Association of Singapore this week called on the government to "stand ready to take supportive measures to prevent a tipping point" if the market turns sour.
Housing loans grew just 6 per cent in September 2014 from a year ago, compared to the peak of 23 per cent in August 2010. Borrowers who took more than one housing loan accounted for 15 per cent of all new housing loans as at the third quarter of this year, half of the 30 per cent in 2011.
Volume of new housing loans, which follows housing transactions, contracted from S$11.4 billion in the second quarter of last year to S$6.7 billion in the third quarter of this year. The banking system's housing non-performing loan (NPL) ratio - referring to loans that are more than 90 days past due - ticked higher to 0.36 per cent in the third quarter of this year, compared to 0.28 per cent in the first quarter of the year.
But this was due mainly to a handful of defaults for high-end housing projects - some of which were reflected in the publicly available loan books of UOB. Overall NPL ratio for housing loans remains very low.
Under MAS's stress test - which could include a collapse of US economic growth, a eurozone crisis, and a pallid Chinese economy - the housing NPL ratios would remain under 6 per cent. Banks would also still meet their minimum regulatory total capital adequacy ratio requirement of 10 per cent in that situation.
There are no clear data points that show how affordable a private home should be, when measured against income. Between 2008 and 2013, the median monthly household income of residents rose by 11 per cent in real terms, but this is likely more useful when comparing against the rise of prices of HDBs flats. Eight in 10 in Singapore live in public housing.
MAS also warned of the risks behind overseas property purchases, loans for which make up less than 2 per cent of total housing loan exposures for banks based here.
One safeguard, though, is that these loans would still be subject to the TDSR (Total Debt Servicing Ratio), since they are taken in Singapore.
MAS also noted that S-Reits, or Singapore's real estate investment trusts, have shown better debt management. During the crisis, S-Reits experienced refinancing pressure when about one-third of their debt matured within the same year in 2009.
The weighted-average debt maturity of the S-Reit sector has increased to 3.2 years in 2013 from 2.1 years at the end of 2008. They have also used derivatives to hedge against the risk of rising interest rates.