Property curbs will hit Singapore banks hard only by 2019

Lenders have one more year of relief amidst previous approvals they drew down.

The earlier measures announced by the government to rein in Singapore’s runaway home prices will only impact banks by 2019 as their property portfolios are expected to weather through the cooling policies in the next few quarters, according to a flash note from DBS.

“We see limited impact on housing loan growth at least in the next few quarters, thanks to previous approvals as they draw down,” DBS said in a statement, adding that property developer loans may still sustain their strong performance up till Q2.

Loan yields are also on the uptrend as 3-month SIBOR inched up from 1.2% in Q4 to 1.3% in Q1, DBS added. However, some banks may expect better profitability than others as manifested through their net interest margins (NIM).

Also read: SIBOR set to buoy Singapore banks from slow mortgage growth

“For UOB, its funding cost in SGD remains tighter given its higher SGD loan-to-deposit ratio vs peers. UOB issued some short-term debt during the quarter. OCBC continues to see the 1-month (loans) and 3-month (deposit) HIBOR gap causing NIM at OCBC-WHB to stay soft. Comparing the two, UOB should still see some NIM uplift but OCBC’s NIM might disappoint,” the report added.

In fact, banks may already be moving ahead to offset dismal lending prospects in the near-term through price adjustments in their mortgage packages. Mortgage Consultancy Pte Ltd told Singapore Business Review in an earlier interview that a number of banks have been withdrawing fixed deposit linked packages in favor of Sibor pegged and board rate packages.

“Given the extent of the new cooling measures, we expect the home loans demand to be subdued. Our interest rates will continue to be competitive to the market,” OCBC’s head of group of corporate communications Koh Ching Ching said when asked for comment.

The government earlier raised the rates for the Additional Buyers’ Stamp Duty (ABSD) and tightened Loan-to-Value (LTV) limits on home purchases, prompting a slew of panic buying and developer stock corrections following the surprise announcement.