This is what Singapore local banks are really scared of

Is this threat likely to happen?

According to CIMB, the biggest risk for local banks would be a drastic decline in property prices. This could lead to a spike in mortgage NPL, similar to that seen during the Asian financial crisis. 

"However, we think that the property market is highly unlikely to tank given the tightness of the labour market compared to 1997/98," CIMB noted.

A buoyant rental market should also help property investors find some rent to support mortgage payments. Residential occupancy is not expected to rise materially above 5%. 

CIMB added that declining mortgage NPL trend in recent quarters show that property owners are very comfortable.

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