Housing loan growth crashed to seven-year low in October

Don’t expect a turnaround next year.

Singapore banks saw the slowest pace of housing loan growth in seven years in October. Housing loans grew at 6.4% year-on-year in October, dragged by the weak property market and a higher base.

According to Maybank Kim Eng, 2015 may not be much better as demand will stem mainly from drawdowns for newly completed homes sold in 2012-13.

“Industry domestic banking unit (DBU) loans grew 9.0% YoY in October, down from 10.6% a month earlier. Business and consumer loans grew at their slowest pace in four and seven years respectively. The former’s slowdown was led by lending to general commerce (+12.3% YoY), transport, storage & communication (+13.5%) and financial institutions (+15.4%). The latter’s deceleration came about as property-market sentiment remained poor. But as we had toned down our loan-growth expectations after 3Q14 results, especially for DBS, there is no need to revise numbers just yet,” said Maybank Kim Eng.

Here’s more from Maybank Kim Eng:
As SGD deposits grew just 0.2% MoM and 1.5% YoY, SGD LDR may not stir next year. This is because loan growth could decelerate further. Deposits may not grow strongly as holding cash remains unappealing amid low interest rates. October’s SGD LDR was 86.4%.

We expect loan growth to average 9% in 2015 for our coverage universe, relatively unchanged from our organic loan projection for this year. The driver will primarily come from their overseas operations.

On the domestic front, home loans should expand just 4-6%, without a property-market revival. However, we believe their slack will be taken up by better business loan growth of 10- 12%. 

General commerce loans could prove the wild card. If the global economy picks up steam, we expect DBS’s loan growth to accelerate the most, helped by its exposure to Greater China’s trade loans.