Personal debt bomb
To mark the record year of Forum contributions last year and Wednesday night's annual Forum Writers' Dialogue, the Forum editor has selected 68 letters published last year which, in his view, reflected the issues raised by Forum writers in 2011. Kindly read "A letter from the Forum editor" which explains the reasons and criteria for selection. Kindly note as well that as these letters are a reprise, no reply by official agencies are required.
THE real star behind the recent Monetary Authority of Singapore statistics is consumer loans and not business loans ("Business loans surge in sign of upswing"; last Thursday).
Business loans actually contracted from July 2009 until March last year, and showed anaemic growth until the second half of last year.
By contrast, total consumer loans have never declined and have grown steadily with usually double-digit growth year on year. Even in the depths of the financial crisis, total consumer loans were growing at a high single-digit pace from October 2008 to September 2009, before spurting into double-digit territory a year ago.
The growth of total consumer loans has quickened from 10 per cent a year ago to more than 18 per cent for the past three months to reach $150 billion. Business loans managed only a double-digit growth from October to November last year.
The performance of business loans therefore pales in comparison with the growth of consumer loans.
The fast growth can be explained by housing loans. January 2008 housing loan figures were already 16 per cent higher than the corresponding figure in 2007. This double-digit performance lasted until October 2008, when growth figures slipped into the high single-digit figures before going back into double-digit growth in July 2009. Total housing loans are now $111 billion.
Since May last year, housing loans have been growing at more than 20 per cent year on year, a growth rate that must be the highest ever seen in Singapore.
Two other milestones which merit mention are that the total number of main credit cards crossed six million in October last year; and second - which is of greater concern - that rollover balances breached the $4 billion mark in November. This is the amount that is not paid by cardholders and on which interest is charged at usually 24 per cent per annum. Rollover balances have been growing at an average annual rate of 11.5 per cent for the past two years.
Personal indebtedness in Singapore is, therefore, growing unabated and the pace has quickened this year. The recent big surge in housing loans and the growth of rollover balances raise the question of whether Singaporeans, already facing one of the highest debt-to-income ratios in the world, have placed themselves in a very precarious situation.
If the economy stumbles and real estate prices decline, many individuals will be unable to pay off their debts.
Kuo How Nam