, Singapore

Fears escalate as rising household debt, property bubble hit Singapore

The pace of debt increase is alarming.

According to Barclays, it is increasingly concerned about rising household leverage and the “bubbly” property market in Singapore

Here's more from Barclays:

Apart from its tendency to import a crisis, we think Singapore has some domestic vulnerabilities of its own.

Our main concern is rising household debt, a bubbly property market and the related exposure of the banking sector.

Households have taken advantage of very low interest rates in the past few years and borrowed extensively to purchase property in Singapore.

Moreover, 30% of outstanding loans are for investment purposes, rather than owner occupation. Residential property prices have risen by more than 60% from the trough in Q2 2009 and are at historical highs, notwithstanding nine rounds of cooling measures implemented by the government and the MAS.

As a result, household leverage, and household and banks’ exposures to the property market are higher today than during previous property price peaks.

The pace of the increase is also concerning. Household debt stood at 75% of GDP as at Q2 2013, up from a recent trough of 63% in Q1 2010. While household debt has risen 41% over this period, household income has increased by only 25% and wages by even less, just 15%.

Bank loans for building and construction, and mortgages also total 79% of GDP, up from 62% over the same period, and banks’ loan-to-deposit ratio has risen from 71% to 100%. 

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