Here are the silver linings in Singapore's property woes

Singapore households are cash-rich.

According to Barclays Research, all previous property market crashes have coincided with economic recessions.

Household consumption and construction-related investment typically contract. A pullback in bank lending also affects broader economic activity.

However, Barclays noted that the silver linings today are that households are cash-rich and loan-to-value ratios still reasonable. 

Here's more:

Total household liabilities are less than 90% of cash assets, compared with120% at the peak over 2001-03. This savings buffer may allow households to smooth consumption.

According to MAS statistics, the average LTV ratio for private sector residential borrowing is 48%. This looks reasonable from both historical and cross-country perspectives.

Thus, any rise in NPLs and consequent impact on banks’ balance sheets may be mitigated, which would also alleviate the potential negative feedback loop via the financial channel.

Furthermore, to cushion any rapid price declines the government and the MAS can roll back the nine rounds of cooling measures implemented earlier.

In sum, the rapid acceleration in household debt and bank lending are vulnerabilities for Singapore’s economy, which could be destabilising in the event of potential capital outflows and higher interest rates.

A large amount of impending housing supply over the next two years further raises the risk.

As EM market performances are driven by relative fundamentals, we note that Singapore does have chinks in its armour, even if it remains, by most yardsticks, a credible safe haven in the region. But a large property price correction and an economic recession are not part of our base case scenario.