Risks intensify for local developers after short-term debt surged to record high

Short-term loans hit $13.7b in June.

The amount of short-term debt incurred by SIngapore’s property developers has hit a record high. A report by Barclays revealed that for the 42 developers listed on SGX, total short term borrowing jumped 45% year-on-year in June to $13.7b compared to just $9.4bn as of June 2013.

This staggering figure represents a 10-year high, but the percentage of short term borrowing of total borrowings appeared reasonable at 22%, in-line with the average level of 23% in the past.

“As for the gearing, developers’ net gearing ratio has been gradually improving from 57% ten years ago, if the 2009 spike is excluded. Nevertheless, it started to climb up from 2011 and has now reached the highest level since 2011. Currently, the net gearing is at 32% as of Jun 2014, below the 37% historical average

“Among the major developers, most developers saw increase in short term debt and net gearing levels y/y except for Keppel Land which saw short term debt fall (though gearing still up) and GLP which saw net gearing decline (though short term debt still up),” stated Barclays.