Singapore home prices to fall 3% per annum in 2015-2016: Fitch Ratings

FITCH Ratings on Thursday said that Singapore property prices are likely to fall further in 2015-2016 by around 3 per cent per annum for both public and private homes.

In tandem with Singapore's benchmark rates, mortgage rate indices will also increase slightly this year, albeit still reaching low levels of around 2 per cent.

In part, abundant liquidity will help to keep funding costs low, and cheap funding should also limit downside risks to house prices, it said.

And as mortgage costs increase, delinquency rates for the three local banks too will likely rise by 0.3 percentage points to 0.8-0.9 per cent this year.

This is still "comfortably low", thanks to Singapore's strong labour market and manageable debt burdens. Debt burdens have been contained by a rule since mid-2013 that borrowers' monthly debt repayments cannot exceed 60 per cent of their gross monthly income.

Fitch said it "expects Singapore's macro-prudential policies to be successful in cooling the property market by trimming access to finance by borrowers at the margins".

"Mortgage demand will most probably stem from property purchases for owner-occupation purposes rather than investment... Fitch expects new lending volumes to grow modestly at around 3-5 per cent."

This was from Fitch's Global Housing and Mortgage Outlook report, which includes forecasts and comparative analysis of house prices, arrears, and mortgage lending volumes for 22 of the world's major housing markets, including Australia, Japan, Korea, and for the first time, Hong Kong, New Zealand and Singapore.