Banks see loans grow in wake of housing boom

Banks in Singapore are benefiting from the sizzling property market.

Not surprisingly, there has been an increase in the number of home loan applications.

And with the outlook for the property sector remaining buoyant, market watchers say they expect interest rates to hold steady.

Citibank, for example, is reporting an increase of more than 20% in loans growth.

“We have seen a significant increase in housing loan volumes, not just by number of transactions but also by the significant increase in ticket size. Previously in the mass market segment, a transaction size tends to be in the region of S$6-700,000. These days, with the transactions in the higher end luxury segment, ticket sizes range from S$2 million to S$3 million,” says Tan Chia Seng, business director of Citibank Singapore.

“Despite a lower quantum of financing at about 70%, the ticket sizes are still significantly larger, at $1.5 million and above.”

And this increase in housing loans is expected to continue well into the year as the economy continues to grow.

But some are warning that home prices may have run up too quickly.

“Currently we’re looking at the property market being quite healthy so we are still expecting that the kind of growth trajectory we’ve had will remain. However, we also want to sound a note of caution that the prices for property is something we need to be careful of and valuations seems a bit lofty at this point in time,” says Kevin Lam, head of Loans Division at United Overseas Bank.

Market watchers say customers wanting to take out home loans with the banks should not expect interest rates to dip anytime soon, as the strong economy means rates are not likely to go down.

“My personal outlook is that rates will hover at this level and we need to see fresh factors coming in to tip the scale one way or the other,” says Lam.

Private home prices in Singapore are estimated to have climbed 4.6% in the first quarter, the fastest pace of growth in seven years.

Source: Channel NewsAsia, 11 April 2007

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