Bank lending to the property sector continued to accelerate

Bank lending to the property sector continued to accelerate in October, growing at the fastest annual pace in eight years, according to new data from the Singapore central bank yesterday.

Overall loans growth in the banking sector also picked up in October, the latest estimates from the Monetary Authority of Singapore (MAS) show.

Loans to the broad property sector, comprising consumer home loans and business loans to the building and construction industry, reached $105.7 billion at end-October - up 18.1 per cent from a year ago.

The year-on-year expansion was the fastest since October 1999, when property-related lending grew by 19.5 per cent.

Over the month, property-related loans grew 3.2 per cent from $102.4 billion at end-September, the fastest monthly pace since Nov 1998.

Consumer home loans, which include mortgages as well as short-term ‘bridging loans’ offered by banks to buyers of new homes who are waiting to receive the cash from selling another property, grew 14.3 per cent from a year ago to $71.8 billion, the fastest since October 2004. Over the month, the growth was 1.9 per cent, slightly slower than the 2 per cent growth in September.

Much of the period covered by latest data precedes the government’s withdrawal on Oct 26 of the deferred payment scheme for private property purchases, which was aimed at discouraging speculative buying.

David Conner, chief executive of OCBC Bank, said at the release of the group’s third-quarter results on Nov 6 that he expects to see an increase in demand for mortgages over the next two years, partly due to the withdrawal of the scheme, as buyers of new private homes will now have to pay a larger portion of the cost of a property while it is being built instead of deferring payments until the building is completed.

Meanwhile, loans to businesses in the building and construction sector rose 27.1 per cent over the year - the fastest since December 1996 - and 6 per cent over the month to $33.9 billion at end-October.

Total customer deposits grew 20.8 per cent over the year to $311.9 billion at end-October, while total loans grew just 15.5 per cent to $224.1 billion.

On a monthly basis, however, loans growth has outpaced growth in deposits since June. Over the month of October, loans grew 2.4 per cent compared to 1 per cent for deposits.

With the rapid expansion in loans, the ratio of loans to deposits in the banking system has recovered slightly to 71.8 per cent at the end of October, after falling as low as 67.1 per cent at end-May - the lowest in the published MAS data series, which started in Jan 1991.

Overall, loans to businesses grew at a faster pace than consumer loans, both on a monthly basis and when compared to a year ago.

Loans to businesses grew 18.5 per cent over the year and 2.6 per cent over the month to $120.1 billion. Other than the building and construction industry, the rapid growth in business loans was mainly due to expansion in loans to financial institutions and to the transport, storage and communications sector.

Meanwhile, consumer loans expanded 12.2 per cent over the year and 2.2 per cent over the month to $103.9 billion, driven mainly by the surge in home loans. Share financing and credit card lending also continued to grow, although these account for less than 8 per cent of total consumer loans.

The number of credit cards in circulation grew 15.3 per cent over the year and 2.4 per cent over the month to 4.45 million at end-October, excluding supplementary cards. But the total credit card rollover balance - that portion of the credit card debt that is subject to interest charges - dipped slightly over the month to $2.85 billion.

Source : Business Times - 1 Dec 2007