Singapore Home Sales Climb as Moody’s Cuts Outlook for Banks

Singapore’s June home sales rose for a second month to the highest since a March record as Moody’s Investors Service cut its outlook for the city’s banking system on concern that borrowing costs may climb.

Home sales rose 24 percent to 1,806 units last month from a revised 1,459 units in May, the Urban Redevelopment Authority said on its website today, the highest since 2,793 units in March. Moody’s said the “rapid” loan growth and rising property prices in the city adds more risk to credit quality.

Record home prices amid low interest rates raised concerns of a housing bubble and prompted the government to widen a four-year campaign in January to curb speculation prices in Asia’s second-most expensive housing market.

“The operating environment for Singapore’s banking system has been favorable for an extended period, with low interest rates and strong economic growth domestically and in the surrounding region,” Gene Fang, a Moody’s senior analyst, said in a statement today. “With the potential risk of a turn in the interest rate cycle, we view strong asset inflation and credit growth trends as vulnerabilities, as this combination would likely cause credit costs to rise from their current low base.”

Moody’s also lowered the outlook for Hong Kong’s banking system to negative from stable last month on lenders’ growing exposure to borrowers in China.

Singapore on June 28 unveiled new rules governing how financial institutions grant property loans to individuals, extending efforts to curb excessive price increases.

Slow Down

The island state’s private residential property price rose 0.8 percent to 214.9 points in the three months ended June 30, extending a 0.6 percent increase in the first quarter, according to preliminary estimates released by the authority on July 1. The pace of gain in suburban prices more than doubled from the previous three months.

“The numbers don’t reflect the new measures introduced in June,” said David Neubronner, national director at broker Jones Lang LaSalle Inc.’s residential project sales in Singapore. “Growth in home sales will slow down over the second half of the year as the latest curbs are the most potent of all measures introduced so far.”

Singapore has been attempting to rein in prices since 2009, when the government barred interest-only loans for some housing projects and stopped allowing developers to absorb interest payments for apartments still being built.

In January, the government introduced the seventh round of curbs in about four years, including an increase in stamp duties for homebuyers by 5 percentage points to 7 percentage points.

“Sales for the next half of the year will take a breather, largely because the number of new launches will fall slightly in line with new projects developers might plan to sell,” Desmond Sim, associate director at CBRE Research, said in an e-mailed statement. “Fewer launches, combined with the full force of the January 2013 property measures and the latest credit financing rules, will put a dent on sales volume.”

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