MAS says households must exercise financial prudence amidst uncertainties

Household risks remain contained with strong buffers, but resilience is crucial amidst geopolitical uncertainties.

The easing of mortgage rates along with stable income growth has bolstered households’ debt servicing ability; however, Singaporean households must still exercise prudence in their financial management amidst macroeconomic uncertainties, according to the Monetary Authority of Singapore (MAS). 

In its Financial Stability Review 2024, MAS noted that price increases in the private residential market slowed consecutively over the first two quarters of 2024 before declining in Q3 2024, falling by 0.7% quarter-on-quarter (QoQ) and marking the first decline since Q2 2023.

In aggregate, prices rose by 1.6% in the first three quarters this year, significantly slower than the 3.9% increase over the same period in 2023.

Moreover, transaction volumes remained moderate, with average quarterly figures for the first three quarters of 2024 matching 2023 levels but remaining 12% lower than in 2022.

New sales fell by about 43% in the first three quarters of 2024, but this was partially offset by the increase in resale transactions of about 22% in the same period.

Aside from this, the MAS also reported that private residential rents have since fallen by a cumulative 4% with the moderation observed across all market segments, after increasing over three years to a peak in Q3 2023.

Since Q1 2023, quarterly private housing completions have averaged 3,600 units, which was about 50% higher than in 2022.

“Looking ahead, the rental market is expected to be broadly stable, with a steady supply of units coming on stream and demand pressures easing in the coming quarters,” MAS said.

With the ramp-up in private housing supply through the Government Land Sales (GLS) programme, supply-demand conditions in the private residential property market have been coming into better balance as the inventory of unsold units in the supply pipeline has been correspondingly replenished.

“Whilst the recent easing of domestic interest rates may have boosted market sentiments as developers resumed project launches, the macro-financial outlook is subject to significant uncertainties arising from geopolitical conflicts and trade tensions,” MAS said.

“Existing property market and macroprudential measures have restrained excessive demand and ensured household financial prudence,” they added.