Property cooling measures could threaten banks' loan growth

The cooling measures may likely strike UOB as it is the most exposed to property-related lending.

The Singaporean government's surprise housing cooling measures that imposes Additional Buyer’s Stamp Duty (ABSD) and limits for Loan-to-Value (LTV) limits for residential property purchases could hit banks' loan growth for H2 2018, DBS Equity Research said. 

The loan growth sentiment will dampen as it is largely driven by property development companies which will likely to suffer more compared to first-time buyers. Meanwhile, DBS thinks that mortgage growth might still stay relatively stable over the next few quarters from existing drawdowns.

Also readHigher ABSD rates lead to last minute home-buying frenzy

They believe the cooling measures will likely strike UOB as it is the most exposed property-related lending.

“Singapore banks are over-owned by investors’ versus other ASEAN Banks based on our checks, at least since the middle of 2017,” DBS analysts Sue Lin Lim and Rui Wen Lim said. “The slightest negative news, would easily prompt a sell down.”

They cited that the newsflow about weakness in the power and water sector had led investors to become cautious to a certain extent.

“We believe investors could hold on a little longer for the upcoming higher interim dividends,” the analysts noted.

Despite this, they believe Q2 18 earnings will not be affected by the property frenzy. The analyst thinks that wealth management income will be a key bank driver for banks amidst the property woes.

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