OCBC feared to be at highest risk in any housing meltdown in Singapore

Should it feel very afraid?.

Mounting concerns have been sensed over potential loan defaults by foreigners who had snapped up Singapore properties from 2005 to 2011.

According to a research note from Maybank Kim Eng, more luxury homes sold at losses in Sentosa and Orchard, foreigners’ favourite enclaves, have been making the news.

The holding power of Chinese investors, the largest group of foreign purchasers since 2011, is perceived to be strong but untested. Indonesians, once the leading foreign buyers, have been less active since 2012.

However, Maybank Kim Eng sees minimal risks of a massive withdrawal of foreign equity from the housing market without a global economic collapse.

Maybank Kim Eng noted that it takes comfort in the tighter credit criteria applied to foreign investors since 2009. With their LTVs at less than 60%, banks should be fairly protected.

Here's more from Maybank Kim Eng:

Sifting through the 10 most-sought-after projects by foreigners, we note valuation resilience. We believe luxury homes sold at large losses are isolated to selected projects.

We believe OCBC would be most at risk in any housing meltdown, given its backend-loaded loan growth. DBS should be the least, thanks to its modest housing loan CAGR of 8.2% in the past nine years (UOB: +14.4%, OCBC: +12.7%).

We believe UOB is the most exposed to Sentosa. But as much of its mortgage growth occurred during the early housing boom, risks for the banks should be limited.