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Soft landing for Singapore housing market is credit positive for local banks: Moody's
RATINGS agency Moody's said on Monday that the gradual decline in Singapore's private home price index for the third quarter is credit positive for Singapore banks as it relieves pressure on bank asset quality.
"Further price increases would have increased the risk of a real estate price bubble bursting," Moody's said in its credit outlook noted on Monday, commenting on the Urban Redevelopment Authority's flash estimate released last week .
"Despite a few isolated cases driving a small increase in problem home loans in second-quarter 2014, we expect the asset quality of housing loans to only deteriorate mildly but still remain robust this year and next owing to stable economic growth, low unemployment and a small increase in interest rates," it added.
Moody's also noted that Singapore's property prices are easing due to regulatory moves aimed at cooling the market. Between 2009 and mid-2013, the Monetary Authority of Singapore (MAS) have implemented eight rounds of property cooling measures to address concerns that low interest rates would lead to a property price bubble.
Macroprudential measures, especially the introduction of the total debt-service ratio (TDSR) cap of 60 per cent rolled out in late-June last year, contributed to a significantly smaller increase in housing loans, which rose in June 2014 by 8 per cent from a year earlier. Year-over-year growth in housing loans in 2014 has been the lowest in almost five years.
Despite the property market cooling off, the quality of housing loans at DBS Group Holdings and Oversea-Chinese Banking Corp (OCBC) is stable, while that of United Overseas Bank (UOB) has weakened mildly because of a few isolated problem loans, Moody's noted.