By Linette Lim | POSTED: 02 Jul 2013 12:02 AM | CNA


Shares of the three Singapore banks took a hit following the latest move to curb home loans further.

Although some analysts have said the latest measures will only impact a small section of home buyers, what is more worrying is the banks’ and households’ exposure to the property sector.

Total home loans as a proportion of yearly gross domestic product (GDP) climbed to above 45 per cent in May.

The latest home loan measures that took effect over the weekend are expected to hit property investors hard.

Investors looking to pick up a second or third property will not be able to escape stricter loan-to-valuation ratios by applying for home loans using their children’s names.

But some analysts said it is not just the stricter rules that will keep home buyers at the sidelines.

The three local banks are also expected to step up their risk controls and may be less aggressive in competing for market share.

Jonathan Koh, associate director at UOB Kay Hian Research, said: “We are having zero interest rates right now, and maybe we will have zero interest rates for another two years. But beyond that, we are likely to have increases in the interest rate.

“So given that environment, I believe banks will not be overly aggressive in competing to gain market share in this space. And I think over the last six months, we have already seen rises in mortgage rates.”

Total outstanding home loans in Singapore is equal to 45 per cent of annual GDP.

ANZ Research said that remains well above the long-term trend.

But after seven rounds of property cooling measures, loans growth has been slowing and is expected to slow further in the second half.

Timothy Kua, director of, said: “As with all the previous rounds of cooling measures, we expect to see a fairly drastic drop in demand in the next two months by about 10 to 20 per cent, as buyers shy away from the market to get a sense of what is going on.

“But it should slowly pick up and stabilise (by year-end), to about 5 to 10 per cent below the market.”

OCBC’s head of consumer secured lending, Phang Lah Hwa, said it is “still early days to quantify the level of impact on property loan volumes”, and added that with the new measures, banks will be required to conduct a more extensive assessment of each property loan application.

Of the three banks, UOB is the most exposed to the property sector. Home loans make up 26 per cent of its loan book.

That is compared to 23 per cent for OCBC and 19 per cent for DBS (excluding DBS Hong Kong).

DBS said that prior to the new guidelines, it already has a robust mortgage framework in place.

“The majority of our customers are first-time home buyers who are less likely to be impacted by the TDSR (total debt servicing ratio),” said Lui Su Kian, the bank’s managing director and head of deposits and secured lending.

She added: “Many of our customers have exercised financial prudence and opted for a home within their means. In addition to having an affordable mortgage, these customers generally do not have to worry about getting a personal guarantor.”

In trading on Monday, UOB fell 1.2 per cent to S$19.62, OCBC declined 1.5 per cent to S$9.85, while DBS ended 0.13 per cent lower at S$15.48.

– CNA/ms