Price surge last year sees more owing over $1m

Business Times - 11 Jul 2008

Price surge last year sees more owing over $1m

Number of such borrowers nearly doubles to 8,280 in April from a yr ago

By SIOW LI SEN

BANKS have been tightening the screws on first-time home buyers but more big loans have been made. More speculators and investors have also taken additional mortgages.

The number of people owing more than $1 million on their home loan has almost doubled to 8,280 in April this year, from 4,695 in May last year, reflecting the record surge in property prices last year.

These rich borrowers make up 2.87 per cent of the total 288,399 real estate loans, according to data from Credit Bureau (Singapore).

Citibank Singapore business director Tan Chia Seng said that the bank has noticed a growing number of home borrowers with larger loan balances over the past year or so.

'This is mostly a function of the higher home prices in general. In addition, some developers have also taken to building large-sized luxury units - in prime areas as well as the outskirts - and this translates into bigger ticket mortgage sizes as well,' said Mr Tan.

The bulk of property buyers owe much less though. Over 72 per have less than $200,000 remaining on their home loans.

Banks have gotten more cautious on home loans applications since August last year, when news of the US sub-prime crisis exploded on the global financial markets.

Credit approval for home loans has dropped to 3,949 in April this year from a peak of 5,319 in August 2007, down 26 per cent.

The 30-month average is 3,935 applications approval each month.

'This could be due to more loan (application) rejections,' said Mark Rowley, Credit Bureau general manager.

With banks holding back, the number of first-time home borrowers has fallen steadily to 3,199 in April this year from 4,504 in May 2007.

But the number of people who are taking additional mortgages has risen, to 2,719 in April from 2,446 in December 2007. The number is still lower than the peak of 3,698 in August last year.

Said Koh Ching Ching, head of group corporate communications, OCBC Bank: 'Each application is assessed on the basis of a customer's credit worthiness and takes into consideration factors such as income level, credit history and repayment ability among others.

'Typically, the same factors will also be considered when a customer applies for a second loan although one of the key considerations would be the ability of the customer to service the total debt,' said Ms Koh.

The number of mortgage applications jumped 57 per cent in April 15,840 from the monthly average of 10,085 which could be due to a rash of deferred projects properties being completed.

A United Overseas Bank spokeswoman said that the bank has always taken a prudent approach in its credit assessment process.

'We would take into consideration the existing obligations a customer has and would consider the credit application if the customer meets our credit criteria, regardless of the type of payment schemes selected,' she said.

The good news from Credit Bureau is that the number of home buyers getting into problems continues to fall. In April 2008, 4,102 borrowers were delinquent or 1.42 per cent, down from 2.10 per cent in May last year.

On the big jump in those owing over $1 million, Mr Rowley said that the worry would be if interest rates move up and even more critically a change in the employment situation.

'If interest rates spike - they don't look like they're doing so - there could be some problems.

'The key is employment. In any market where you have full employment, that's fine,' said Mr Rowley. On that score, Singapore is in good shape.

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