This is lower than the 8% growth in 2018.
According to the latest Fitch Ratings, private property prices in Singapore is expected to grow by a modest 2% over the next two years, a significant drop compared to the 8% increase in 2018, reported the Business Times.
“We expect home price growth to reflect the recovering real GDP growth rates of 1.5% in both 2020 and 2021, after growth decelerated to 0.6% in H1 2019,” Fitch said in its Global Housing and Mortgage Outlook 2020 report.
From Q3 2018 to Q1 2019, mortgage rate hike and regulatory tightening saw private home prices fell 0.7%. However, property prices have rebounded since Q2 2019 and Fitch is expecting “minor growth” for the rest of the year.
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The report also noted that private property prices will continue to rise if borrower affordability is improved, household incomes grow faster than home prices and if interest rates are low, adding: “but if the government views home prices as rising more than is justified by economic fundamentals, we expect that the government would again cool the market through macro-prudential measures.”
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NPL Ratio Is Also Expected To Increase
Fitch expects the housing NPL (non-performing loan) ratio to slightly increase in the next two years, albeit remaining low at 0.4% to 0.5%, on the back of improving household debt-to-income ratio.
“Mortgage performance will also be supported by continued low unemployment of about 2% in 2020 and 2021,” it said.
Moreover, Fitch does not expect a mortgage rate hike in the near future, supporting borrowers’ ability to pay. Mortgage rates rapidly increased to 2% at the end of the first half of 2019 due to a sharp increase in the benchmark rates like the three-month Singapore Interbank Offered Rate (Sibor).
However, the city-state’s benchmark rate began to decline after the US Federal Reserve unveiled a series of three rate cuts from July this year.
With this, mortgage lending growth is forecasted to remain subdued in the near term.
“After a projected small decline of 0.5% in 2019, we expect 2% annual growth in each of 2020 and 2021 in line with improving market sentiment,” said Fitch.
Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru.com.sg
Victor Kang • December 19, 2019
Source: PropertyGuru
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