Wages rise, debts slow and S'poreans get richer
Households have weathered crisis relatively well: MAS
By SIOW LI SEN
(SINGAPORE) Singaporeans are getting richer as household debt has risen slower than wage growth, financial crisis notwithstanding. Add high property prices and the reluctance to spend freely and you have household assets standing at more than six times the household debts.
'Households have on the whole weathered the crisis relatively well, thanks to strong balance sheets,' according to the Monetary Authority of Singapore's (MAS) Financial Stability Review 2009 released yesterday.
'The asset quality of household loans has not deteriorated significantly and so should not affect the stability of the banking system,' it said.
Household net wealth stood at an all time high, an estimated $1,001 billion in Q3 2009, after hitting a trough at $895 billion in Q1 2009. This is also more than double that of $400 billion plus in 1999.
Aggregate household net wealth is at about 4 times of gross domestic product, up from about 3.6 times in Q1 2009.
Still, the MAS said the healthy position is not uniform across all homes.
'Those who were retrenched or highly leveraged would likely have come under more pressure,' it said.
As Singaporeans maintain discipline in taking on consumer debt, assets remain more than 6 times the household liabilities .
Cash and CPF balances alone have exceeded total household liabilities since 2006.
After declining in Q4 2007 and Q1 2009, household holdings of equity and managed funds are estimated to have recovered by about 40 per cent to $150 billion in Q3 2009, in tandem with the rising global equity markets.
Similarly, property holdings have turned around, up by an estimated 9 per cent to $537 billion in Q3 2009 from the low of $491 billion in Q2 2009.
Total liabilities increased moderately by 4.4 per cent year-on-year in Q3 2009, which is much lower than the long-term average growth rate of about 13 per cent. Most of the increase came from housing loans, which account for the bulk of household borrowing. After moderating from around 15 per cent in Q4 2007 to 8.8 per cent in Q4 2008, housing loan growth has seen a recent uptick to 12 per cent in Q3 2009 due to increased activity in the property market.
Other types of household debt such as credit cards, car loans and share financing grew at a sluggish pace.
Share financing loan growth recovered from negative territory in Q2 2009 to 18 per cent in Q3 2009, along with the rebound in the stock markets.
Share financing represents less than one per cent of total household debt currently.
Credit card loan growth slowed from 19.5 per cent in Q3 2008 to 11.4 per cent in Q3 2009 while car loans shrank by 2.2 per cent in Q3 2009 as a result of falling car sales.
Credit card loans comprise a relatively small share of total household debt at about 3 per cent as of Q3 2009.
Household remuneration growth has outpaced the rate of increase in household debt in the last few years and the household debt to remuneration ratio has been falling.
'However, the ratio may rise this year, as the downturn would likely constrain wage growth. As of June 2009, average wages had contracted 2.1 per cent year-on-year, compared to a 3.8 per cent rise in household liabilities over the same period,' the MAS said.
Looking ahead, households may be tempted to take on more leverage in the short term, given strong market sentiment in the domestic equity and property markets and expectations that low interest rates could persist for some time, it said.
'This might expose households to increased risks in light of the still uncertain paths of economic recovery and interest rates. The current healthy balance sheet position suggests that households in general would be well placed to weather these downside risks.'
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
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