Singapore banks are expected to benefit from property cooling measures that kicked in last Friday, as these will reduce speculative demand for residential property and increase banks' buffers "if and when property prices fall significantly", ratings agency Moody's said yesterday.
The measures, which include higher additional buyer's stamp duty rates and tighter loan-to-value (LTV) limits, reduce the risk of a property price bubble, future price shocks and losses from mortgage loans, which is credit positive for Singapore's banks, it added.
"We expect that the new measures will dampen bank loans for residential property purchases and the resurgence of investment and speculative purchasing," said Moody's Investors Service senior analyst Simon Chen.
"We also expect the measures will improve banks' newly originated housing loans asset quality amid Singapore's rising interest rate environment and strong supply pipeline."
At end-March, the three large local banks - DBS Bank, OCBC Bank and United Overseas Bank (UOB) - had 42 to 50 per cent of their loan portfolio exposed to the property sector, including housing loans.
Moody's expects household loan delinquencies to remain low, because measures like the total debt-service ratio cap of 60 per cent have constrained household credit growth and excessive borrowing.
Singapore households as a whole also have a very strong net asset position that will provide an extra buffer to service their debt, with total household financial assets being more than 3.5 times household liabilities as of the end of last year.
The ratings agency also noted that Singapore's system-wide non-performing loan ratio for mortgages was 0.4 per cent as of the end of last year, with banks having a low average mortgage LTV ratio of 53 per cent.
Fewer than 5 per cent of mortgages have LTV ratios exceeding 80 per cent, and banks in Singapore have not been allowed to offer housing loans at such high LTV ratios since 2013.
Bank shares rose yesterday, with DBS leading the way on a 1.4 per cent gain to $25.71. UOB ended 0.9 per cent higher at $26.51, and OCBC was up 0.6 per cent at $11.31.