Property sector accounts for 51% of Singapore banks' loans

13:29, December 16, 2010      

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Singapore banks' exposure to the property sector has doubled from 24 percent of total loans in 1991 to 51 percent as at September 2010, but banks in Singapore face low risks of default.

In a report released by IIFL Securities Research -- a unit of financial services company India Infoline Group -- noted that Singapore banks' property exposure was comparable to the 52 percent in Hong Kong, local daily Business Times reported on Thursday.

But the two cities have significantly higher exposure than the 20 percent to 30 percent norm for the rest of Asian banks. So does such high exposure to property pose any systemic risk.

"Remarkably, bad loans in the property sector were not a cause for concern in both Singapore and Hong Kong during the recent financial crisis," IIFL was quoted by the newspaper as saying.

"In Singapore, we do not consider this as a risk due to several reasons. Firstly, the bulk of housing loans (over 70 percent) are to owner-occupied properties, which have a lower risk profile."

"Secondly, housing loans in negative equity are less than one percent of outstanding housing loans currently and were only 3 percent during the crisis period, when property prices island-wide dropped by an average 25 percent between the second quarter of 2008 and the second quarter of 2009," IIFL added.

"Thirdly, only 7.1 percent of housing loans have a loan-to- value ratio of above 80 percent. And finally, the non-performing loan ratio of developer loans is below one percent, as there are strict criteria on who can become a property developer in Singapore and most have low leverage and strong balance sheets."

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