Singapore banks' system DBU loan growth to hit 2% in 2017

That is if housing loans grow by up to 6%.

Housing loans represent 31% of the system’s domestic banking unit (DBU) loans. Following the implementation of cooling measures since 2009-2013, Maybank Kim Eng says mortgage growth has slowed from 16% YoY at end-2012 to 4% YoY now. Recent buoyancy in the Singapore property market augurs well for housing loans.

"In assessing the impact of housing loans, we conclude that loans could increase by SGD7-12b (US$5-8b) in our base case scenario of 24.5k units of private housing sales, raising housing loan growth by 4-6% YoY in 2017. This translates to an increase of 1-2% of system DBU loan growth in the same year."

Here's more from Maybank Kim Eng:

The Singapore residential property market has enjoyed renewed interest, following the easing of property cooling measures in March. Take-up rates at property launches have improved, the secondary market has been more active, and land tender bids have beat expectations. These are positive for bank lending to the housing and building and construction (B&C) sectors.

At the end of May 17, the banking system’s domestic banking unit (DBU) housing loans constituted 31% of advances or SGD194b. For the three Singapore banks, housing and B&C loans together form 40-50% of total loans, with housing loans comprising 21-27% as at 1Q17 (Fig 1 and 2).

In our assessment, housing loans remain an important lending segment for the three banks. Banks are prepared to tighten pricing to attract new borrowers, potentially limiting the upside to earnings. Should property transactions be sustained, there could be upside to our current FY17E system loan growth assumption of 6-7%.