DBS has cut its guidance for Singapore mortgage growth as the cooling measures the government enacted in July continue to bite the sector.
Piyush Gupta, DBS’ CEO, said Monday that overall he was “relatively sanguine” about the bank’s business momentum, with the Singapore property market his only caveat.
“For the first time in a long, long time, we actually saw a reduction, a shrinkage in our mortgage loan book in the first quarter,” he said at a media briefing. He said the mortgage book had declined by around S$500,000, and pointed to the cooling measures as the cause.
“People are paying down their loans and new bookings are not coming in,” he said, adding the bookings have remained soft.
“I earlier guided that we thought mortgages would grow between S$1.5 billion and S$2 billion this year. I don’t think we’ll get much more than S$1 billion to S$1.5 billion because we’d have to make up for the reduction in the first quarter and then move up,” Gupta added.
“On a full year basis, we’ll go up because the pipeline is looking better for the next three quarters. So I do think we’ll be up at the end of the year,” he said.
DBS’ cut to its mortgage guidance came after the Urban Development Authority released data last week showing residential prices were falling and sales weren’t keeping pace with launches.
The URA overall private residential property price index declined 0.7 percent on-quarter in the first quarter, after slipping 0.1 percent in the previous quarter.
Ong Tek Hui, senior director for research and consultancy at real estate services firm JLL, pointed to a “significant mismatch” between the number of developments being launched and demand.
During the first quarter, 2,989 private residential units were launched for sale, up 80.4 percent on-quarter and more than three times the number in the first quarter of 2018, Ong said in an emailed statement last week.
“The 1,838 new private homes sold in the first quarter of 2019 shows that demand was unable to keep pace with the relatively large number of units offered for sale,” Ong said. “Demand continues to be affected by the cooling measures imposed in July while softening prices would have resulted in more buyers adopting a wait-and-see attitude.”
He pointed to data showing the total transaction volume of private homes in the quarter was 3,743 units, including both the primary and secondary markets, which was down 3 percent on-quarter and 29.7 percent on-year.
Ong said that “is fairly indicative of how much the market has slowed after the July 2018 cooling measures.”
In early July, Singapore’s government announced a fresh round of cooling measures for the property market, targeting the additional buyer’s stamp duty (ABSD) and loan-to-value limits.