Home price growth could ease to 2% in 2019: Fitch Ratings

Mortgage rate hikes could further dampen property price growth.

Paired with rising interest rates, the cooling measures will continue to weigh on buyer sentiment which could then result to home price increases to moderate to 2% in 2019, Fitch Ratings said. By 2020 however, home prices could recover growth to 3%, they added.

“Rising mortgage rates should further temper property price inflation but there will still be upward price pressure as household income is expected to continue to grow faster than home prices, which will improve affordability,” Fitch Rating explained.

Meanwhile, the firm also believes that the housing non-performing loan ratio (NPL) could grow to 0.7% by 2020 which is up from the 0.4% projected in 2018 due to climbing mortgage rates in Singapore.

“Mortgage rates in this primarily floating-rate market are expected to follow the policy rate, which should be influenced by further US rate rises, as short-term rates in Singapore and the US have historically shown a fairly strong correlation,” Fitch Ratings said.

Despite this, the research firm thinks that any increase in delinquencies will be limited due to support from rising household incomes, a tight labour market and strong household balance sheets.
“The housing NPL ratio was 0.4% in 2Q18 and we expect it to rise only slightly to 0.55% in 2019 and 0.65% in 2020,” they explained.

Additionally, the research firm thinks that mortgage lending could grow by 3% both in 2019 and 2020, with owner-occupied home purchases to remain the main driver of mortgage loan growth. However, Fitch Ratings think that the momentum is likely to be weak in 2019-2020 due to slowing home prices, rising interest rates, low population growth and the regulator’s cooling measures.