SINGAPORE - The slow-down in Singapore's property market has reduced high-end condominium prices and raised concerns that major local banks could be vulnerable to a surge in non-performing housing loans.
Tightened credit criteria for foreign investors -- who are important players in Singapore's luxury property market -- should nevertheless help shield against large-scale loan defaults, according to a report issued by Maybank Kim Eng this week. It noted that the more stringent credit controls have been in place since 2009.
"After the hard lessons of 1997-98, the authorities have become more proactive," it said. Singapore government measures to prevent bad loans escalating include lowering the maximum loan-to-value ratio that can be applied.
According to Singapore's Urban Redevelopment Authority, the price of private residential properties dropped 4 per cent in 2014. Maybank Kim Eng notes that loan defaults have concentrated mostly among luxury homes which are more popular with foreign investors, particularly those located near Orchard Road, Singapore's retail hub, and Sentosa Island, a vacation destination with sandy beaches and resort hotels.
Among the three largest Singaporean banks, United Overseas Bank (UOB) is the most exposed on Sentosa. The report indicated UOB's non-performing housing loan volume has risen 61.4 per cent since the end of 2013.
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