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SINGAPORE HAS ONE OF THE HIGHEST HOUSEHOLD DEBTS IN ASIA

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SINGAPORE HAS ONE OF THE HIGHEST HOUSEHOLD DEBTS IN ASIA

Post by Darkmen on Thu Aug 29, 2013 3:39 pm

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Relatively higher than Asian peers.

According to Bank of America Merrill Lynch, it estimates Singapore's household debt at 77.2% of GDP in 1Q, relatively high compared to other Asian counterparts.

Here's more [Source]:

The government is taking steps to cool the secondary market for public housing and ensure that households do not over-leverage. In June, the Monetary Authority of Singapore introduced a total debt servicing ratio (TDSR) framework for property loans granted by financial institutions to individuals.

The MAS is mindful of the risks when Singapore interest rates begin normalizing (ie, rising), highlighting that an estimated 5-10% of borrowers have over-leveraged on property purchases.

The Housing Development Board (HDB) has introduced more measures to cool the resale market for HDB flats. The mortgage servicing ratio (MSR) has been reduced to 30% of gross monthly income, down from 35%.

Furthermore, Singapore permanent residents (PR) will now have to wait three years before they are eligible to purchase a resale public flat. Previously, they were able to buy resale flats upon attaining PR status. The measures took effect immediately, after the announcement on Tuesday.

This island state, which is an important financial hub, has among the highest level of household borrowing relative to gross domestic product (GDP) in Asia at 77 percent, rising from around 64 percent in 2007. Home loans, which account for around three quarters of household debt, have grown rapidly in recent years together with a booming property market.

Now with bond yields beginning to climb – the 10-year Singapore government bond yield has risen to 2.5 percent from 1.4 percent in May – concerns are growing over whether there is a debt bubble in the making.

In the recent months, the Monetary Authority of Singapore (MAS), the country's de facto central bank, has introduced new measures to limit consumer debt.

Most recently at the end of June the MAS announced a new framework which requires financial institutions to take into account borrowers' other outstanding debt obligations when granting a property loan. The rule ensures that the property buyer's monthly loan payments do not exceed 60 percent of his income.

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