As a result of Singapore’s love affair with property, debt levels have soared to 75 percent of its GDP from just 38 percent in 2000. This level is high compared to other countries in the region, according to a Standard Chartered report.
The study which covered 12 Asian countries revealed that only Korea, Malaysia and Australia have higher debt levels than Singapore.
The surge in household debt is attributed to high property prices as housing loans account for 74 percent of all consumers loans. In fact, mortgage growth in Singapore increased at a double-digit pace since 2000 and this has shot up further in the last six years.
Mortgages grew at a compounded annual growth rate of 12.1 percent between 2000 and 2012, accelerating to 15.8 percent by 2006 to 2012, the report noted.
Countries with high debt levels do not necessarily face solvency risk. However, the rapid pace of mortgage growth could cause problems.
“Economists are concerned about credit growth, even when a country’s absolute level of debt remains moderate, because credit booms have historically been associated with financial crises, especially in emerging markets,” said the report.
Nonetheless, latest data shows that mortgage growth slowed for two consecutive months in May from a year ago, as April’s 16 percent increase slipped to 15.2 percent in May.
On a monthly basis, home loans rose 0.5 percent in May, down from April’s 0.8 percent uptick.