SINGAPORE: Singapore's central bank urged households on Tuesday to be prudent about property purchases amid a weak labour market and a deep economic slump, even as locals shrug off the impact of the coronavirus pandemic to buy real estate.
"Given that an uncertain economic outlook could have dampening effects on income streams, households should remain prudent in taking up new debt and in committing to property purchases," the Monetary Authority of Singapore (MAS) said in its annual financial stability review.
Locals have been snapping up property in Singapore, long considered a safe haven, and taking a record share of the market as travel curbs thwart foreign investors.
Singapore citizens' share of property transactions touched a historic high of 81.9% in the third quarter, according to the MAS. Prices of private homes fell only in the first quarter and have risen an overall 0.1% in 2020.
"Whenever possible, (households) should continue servicing or consolidating their existing obligations, which would be useful to enhance resilience against any unexpected shocks," said the MAS, which expects economic growth in the fourth quarter to slow.
It also expects labour market recovery to be protracted and resident unemployment to remain elevated in 2021.
Singapore's economy is forecast to contract between 6.5% and 6% this year due to the pandemic, and stage a recovery of 4%-6% next year, according to the government.
Singapore's real gross domestic product levels will remain depressed, recovering to pre-crisis fourth-quarter 2019 levels only in the second half of 2021, the central bank said.
The government has spent about S$100 billion ($75 billion) in support measures to offset the impact of the pandemic.
Singapore's jobs support scheme and loan relief measures for small businesses mean corporate non-performing loan ratios have risen only slightly on aggregate.
"Nonetheless, with economic recovery expected to be gradual and uneven, loan asset quality is expected to deteriorate, particularly in sectors with prolonged earnings weakness," the MAS said. - Reuters
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