Household debt in Singapore increased between Q4 2019 and Q3 2021, with household debt accounting for 70% of Singapore’s GDP during Q3 2021.
With this, the Monetary Authority of Singapore (MAS) urged Singaporeans to exercise prudence when taking on property purchases or debt, reported TODAY.
“Households should exercise caution in taking on new commitments, especially with regard to their abilities to service their long-term mortgage obligations,” said the central bank in its annual financial stability review released on Monday (6 December).
“Highly leveraged households should also plan to build up financial buffers where possible, to allow some cushion against stresses emanating from an unexpected deterioration in macroeconomic conditions.”
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MAS revealed that household debt accounted for 70% of the city-state’s gross domestic product (GDP) during the third quarter of 2021.
Although the figure is down from 72% in Q1 2021, it is higher compared to pre-COVID levels, where household debt stood at 67% of total economic output in Q4 2019.
Notably, household debt rose between Q4 2019 and Q3 2021, while nominal GDP declined – hence the hike in household debt’s share of GDP.
Over the past year, household debt’s total value increased 6.8%.
“Accordingly, household leverage risk has effectively risen compared to pre-COVID levels,” said MAS as quoted by TODAY.
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Housing loans, which increased by 2.4 percentage points, emerged as the single largest contributor to the 3.7% growth.
It was underpinned by the buoyant housing market, which registered higher transaction prices despite the challenges brought by the pandemic on the economy.
The central bank noted that housing loan’s credit quality has improved in the past year, remaining healthy.
“However, in the event of a shock to the property market, the correction in property prices could impact domestic demand, given that residential properties and loans account for the bulk of the household balance sheet, representing about 40% of assets and 75% of liabilities,” said MAS.
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Cheryl Chiew, Digital Content Specialist at PropertyGuru, edited this story. To contact her about this story, email: cheryl@propertyguru.com.sg.
