SLIDING home prices, in particular the high-end ones, is causing more bad loans to pop up in Singapore banks' non-performing loan (NPL) books.
United Overseas Bank (UOB) on Thursday said its housing loans NPL increased in the past two consecutive quarters to S$502 million in Q3 2014, contributed primarily by borrowers investing in a particular high-end residential project in Singapore.
"Total NPL associated with this project was S$166 million, of which S$80 million and S$59 million arose in Q2 2014 and Q3 2014 respectively," said UOB as it released third-quarter results.
UOB posted Q3 net profit of S$866 million, up 18.7 per cent due to loans growth and strong gains from fee and trading income. The earnings were 7.2 per cent higher than those for the previous quarter's S$808 million.
"This NPL was well collateralised with minimal impairment charge. Excluding the NPL from this isolated case, overall housing loans remains relatively flat," UOB said.
OCBC Bank also saw its housing NPLs rise due to high-end homes in Singapore.
Its housing NPL in Q3 rose to S$272 million, up S$45 million or 20 per cent from S$227 million a year ago. OCBC's housing NPL at end-June 2014 and end-December 2013 was S$253 million and S$217 million respectively.
"The increase in the housing loan NPLs in third quarter over the second quarter is largely attributable to the consolidation of OCBC Wing Hang's portfolio with OCBC's," said a bank spokeswoman.
"The rest of the increase prior to the second quarter was due to isolated high-end property cases (in Singapore)", she said.
Property prices are expected to fall further as the market grapples with increasing supply and tight financing rules.
Property prices in Singapore have not seen a "meaningful correction" yet, said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam on Tuesday.
"We have seen some correction in both private property prices and HDB resale prices over the last four to five quarters, but there is some distance to go in achieving a meaningful correction after the sharp run-up in prices in recent years," said Mr Tharman, who is also chairman of the Monetary Authority of Singapore (MAS).
"If we do not get a meaningful reversal after each upswing, property prices will run ahead of the growth of household incomes over the long term, which we should avoid," he said.
Last Friday, figures from the Urban Redevelopment Authority showed prices of private property falling by 0.7 per cent in the third quarter of this year, compared to three months earlier. That marked the fourth consecutive quarterly drop, though it was also the most benign dip since prices chilled a year ago.
The HDB resale market was hit much harder in the latest quarter, with prices slipping 1.7 per cent from a quarter ago - the biggest decline since Q3 2005.