Domestic household debt still on the rise despite policy curbs

Household debt stood at 76.3% of the GDP in Q3.

Domestic household debt is still on the rise despite measures to rein in the overvalued housing sector, a report by Deloitte revealed.

Household debt in Singapore stood at 76.3% of the GDP as of the third quarter of 2014, representing a 5.6% year-on-year growth. Additionally, housing loans accounted for three-quarters of household liabilities as of September last year.

In the second quarter, debt held by companies in the property sector rose to 65% from 55% in Q2 2013.

"A deep and prolonged fall in private residential prices and transaction volumes could hurt indebted property firms as well as leveraged households," stated Lester Gunnion, an economist and a senior analyst at Deloitte Research.

On the bright side, the local banking system remains resilient. Third quarter data show that the banking system’s ratio of housing sector nonperforming loans remained low at 0.36%.

"The Monetary Authority of Singapore (MAS), however, is expected to keep monetary policy tight through the next few quarters, as housing prices remain elevated despite recent moderations. Further correction in the housing market is expected in 2015," he added.