ST : Household net wealth at all-time high

Nov 26, 2010

Household net wealth at all-time high

By Francis Chan
SOARING property valuations have sent the net wealth of households rocketing to an all-time high of $1.16 trillion in the third quarter of this year.

That is 29 per cent up from the height of the financial crisis early last year, and higher than the $1 trillion that households registered a year ago, itself a record.

The Monetary Authority of Singapore (MAS) released the numbers yesterday in its annual Financial Stability Review.

It said balance sheets of households, which were supported by broad-based economic recovery, have largely remained strong.

'The gain was largely due to the higher value of property holdings as the property market continued its upward trajectory after bottoming out in the first quarter of 2009,' said the central bank.

It said property holdings reached an estimated $651 billion in the three months to Sept 30, up 21 per cent from the $537 billion recorded in the same period last year.

'Another contributing factor to rising household net wealth was larger holdings of equity and managed funds, owing to the turnaround in global equity markets in Q3 2010,' added the MAS.

Household net wealth comprises assets less debts.

According to the annual review, aggregate household net wealth stood at 3.9 times Singapore's gross domestic product (GDP) in the third quarter, up from about 3.8 times GDP a year ago.

'The household debt-to-GDP ratio stood at about 67 per cent in the third quarter, which was below the long-run average of about 77 per cent, implying that economic growth has outstripped growth in household debt,' said the MAS.

'In addition, liquid assets have exceeded household debt since 2006.'

The debt-to-assets ratio has remained relatively low, with household debt at about 15 per cent of assets. This is below the long-term average of about 18 per cent.

Cash and deposits also exceeded total household debt, according to MAS estimates.

However, the quick economic turnaround and prevailing low interest rate environment has resulted in higher household debt.

'The key driver of this growth has been housing loans, which account for the bulk of household borrowing,' said the MAS.

'Indeed, reflecting the transaction activity seen in the property market, housing loans grew 23 per cent year-on-year in the (third quarter), up from 8.8 per cent at the trough of the property market in the (first quarter of) 2009.'

While the national debt-to-asset ratio remained 'healthy', industry watchers like International Property Advisor chief executive Ku Swee Yong pointed out a few blind spots.

'We cannot forget that if we stripped out the old money - those from my parents and their kakis (peers) who have fully paid up their mortgages, the risks lying with the next generation, or lower income group, may turn out to be higher', said Mr Ku.