S'pore households' net worth grows a slower 2.3%

Singapore

GROWTH in Singapore households' net worth continued to moderate last year as the rise in the value of their financial assets slowed and the aggregate value of residential properties on their balance sheet dipped despite the higher number of dwelling units.

Data released by the Singapore Department of Statistics showed a 2.3 per cent rise in households' net worth (assets less liabilities) from a year ago to S$1.47 trillion at the end of 2014, easing from a 4.2 per cent rise in 2013 and 8.2 per cent growth in 2012.

As expected, households saw a 1.1 per cent dip in the value of residential property assets to S$819.6 billion, with the main drag coming from public housing.

In line with the drop in HDB resale prices last year, the total value of public housing assets on households' balance sheet contracted 4.4 per cent to S$394.7 billion - steeper than the 0.7 per cent fall seen in 2013. The steeper fall in value occurred despite a 0.4 per cent increase in HDB households to 965,200 in 2014.

Private housing assets held up better, with their total value on households' balance sheet up 2.2 per cent at S$425 billion. A 10.8 per cent jump in private property households possibly offset the impact of a 4 per cent drop in private residential prices last year. As at end-2014, there were 231,200 private property households.

UOB economist Francis Tan noted that while households' net worth has been on a downtrend since 2012, there were signs that the growth in assets picked up again in the fourth quarter.

On a quarter-to-quarter basis, households' total assets edged up 0.9 per cent in the fourth quarter to S$1.76 trillion as at end-2014, after a marginal 0.2 per cent quarter-on-quarter rise in the third quarter. For the full year, households' assets marked a 2.8 per cent increase.

Financial assets grew a slower 6.4 per cent in 2014 to S$943.2 billion on the back of a 6.1 per cent rise in cash (currency and deposits), a 10 per cent jump in the aggregate value of life insurance assets, and an 8.9 per cent increase in CPF assets.

The plunge in oil and gas stocks, however, probably hurt the value of shares and securities held by households in the fourth quarter, said Ku Swee Yong, CEO of Century21 Singapore. The value of this asset class dropped 1.4 per cent to S$174.5 billion on the balance sheet; that was still a one per cent increase year on year.

Meanwhile, households' liabilities rose 5.1 per cent year on year to S$294 billion by the end of 2014. This marked the slowest growth since 2011, as growth in both mortgage loans and other personal loans cooled last year amid lending curbs introduced by the government.

"The liabilities growth rate has stabilised in 2014 across the four quarters," Mr Tan observed. But this year, the impending rise in interest rates and new homes being completed could cause a spike in mortgage liabilities. But the record number of new home completions is a double-edged sword, as it will also bolster the assets component of the household balance sheet, he said.

Rising wages amid a tight labour market and favourable economic conditions also remain supportive of asset growth for households, Mr Tan added.

Last year, the total value of mortgage loans on households' balance sheet rose 5.5 per cent to S$216.7 billion, possibly due to more homes being completed and higher interest incurred on Sibor-linked loans.

Mr Ku said that although the latest set of data looks healthy, he is circumspect about how closely the aggregate value of residential property assets on the household balance sheet tracks the actual value.

"For HDB resale flats, price negotiation has become very tough, transacted prices have moved from cash-over-valuation to cash-under-valuation, but the resale price index only reflected a 6 per cent drop last year," Mr Ku said.

The aggregated public housing value on the household balance sheet may not reflect what people are feeling on the ground, he added. And since borrowers of housing loans for new HDB flats do not start repaying until the flats' completion, liabilities on this front are set to increase as new flats are completed.