Home loan growth is tipped to slow further this quarter amid slumping residential property sales.
Analysts said the loan growth slowdown is to be expected in the wake of tough loan curbs imposed in June under a total debt servicing ratio (TDSR) framework. The TDSR stops banks from issuing a loan that pushes a borrower's debt repayments above 60% of his gross monthly income.
The credit profile of housing loans had improved, and cited a smaller share of new housing loans with a loan-to-value ratio above 70%. This ratio is the proportion of a home's value that a buyer can borrow. Experts attribute the improved loan statistics as a reflection of the effectiveness of the TDSR in limiting debt exposure. Furthermore, loan growth could moderate even further this quarter owing to declining sales volumes.
Experts expect overall home sales volumes to fall about 30% this year from last year. While the overall price index is expected to rise by up to 2% this year from last year, the index may fall by 5% to 10% next year.
A statement from MAS stated that momentum has varied across different market segments. It noted that while private home prices in suburban areas have climbed 2.5% very quarter on average this year, prices on the city fringe and in the city centre have started to show some weakness, turning negative in the third quarter. While suburban private home prices will fall at some point, any drop would probably be seen only around mid-next year as developers need time to adjust their prices, unit layouts and marketing strategies.
Source: Dec 05, 2013 - By: iProperty.com Singapore
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