Singapore banks to gain from property cooling measures: Moody's

It can reduce future price shocks and mortgage loan losses, according to the ratings agency.

The property cooling measures by the government could buoy banks through toning down property price bubble and reducing future price shocks and mortgage loan losses, Moody’s Investors Service said.

“We also expect the measures will improve banks’ newly originated housing loans asset quality amidst Singapore’s rising interest rate environment and strong supply pipeline,” Moody added.

The firm noted that DBS, OCBC and UOB had about 42% to 50% of their loan portfolio exposed to the property sector, including housing loans as of March 2018. It also mentioned that regulatory measures such as the introduction of the total debt-service ratio cap of 60% introduced in 2013 fueled low household loan delinquencies.

“Singapore households as a whole have a very strong net asset position, which, at least for asset-owning households, will provide an extra buffer to service their debt.” the firm said.

The firm also mentioned that at the end of 2017, total household financial assets were more than 3.5 times the household liabilities whilst system-wide nonperforming loan (NPL) ratio for mortgages was 0.4% at, with banks having a low average mortgage loan-to-value (LTV) ratio of 53%.

According to Moody, fewer than 5% of mortgages currently have LTV ratios exceeding 80%. Local banks have been prohibited to approve housing loans at such high LTV ratios since 2013.