Business & Economy Number of homeowners in Singapore defaulting on mortgages on the rise

Number of homeowners in Singapore defaulting on mortgages on the rise

There have been 79 cases of mortgage defaults from January to July of this year. In 2015 there were only 65 cases for the whole year. In 2017, there were 112, and last year, 156

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Singapore—In what is perhaps another sign of a slowing economy, the number of homeowners in the country defaulting on their mortgages has seen a significant uptick, according to a report by the South China Morning Post (SCMP).

According to the Credit Bureau Singapore, there have been 79 cases of mortgage defaults from January to July of this year. In 2015 there were only 65 cases for the whole year. In 2017, there were 112, and last year, 156.

Moreover, according to Colliers International Singapore, mortgagee sales were up to 213 for the first six months of 2019. In all of 2018, there were only 258 such cases in total, while five years ago, the number of mortgagee sales was only at 123 cases, although data from Colliers includes homes that have been re-listed.

Experts are saying that the number of mortgagee sales could be a sign that the economy is stagnant. The SCMP quotes Chua Hak Bin, an economist with Maybank, as saying, “Bankruptcies are also rising, in line with the mortgagee sales, as the economy grinds to a standstill.”

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This year there have been 1,847 applications for bankruptcy in the first six months alone. In 2017 there were 2,932, and in 2018, 3,079.

Two months ago, the GDP growth forecast for 2019 was downgraded to 0.0-1.0 percent.

Additionally, houses offered in auctions are not moving quickly, with numbers of houses sold declining from 6.4 percent in the first quarter of 2018, to 1.4 percent in the same time frame this year, according to Knight Frank, a real-estate consultancy.

Director of research and consultancy at Suntec Real Estate Consultants Colin Tan calls the defaulting on mortgages “a slow death,” and points our that foreclosure on properties is usually a bank’s last resort, as most financial institutions choose to restructure loans or give clients leeway in paying only interest for a short time period.

Mr Tan said,“If you can pay the interest, you’re not in default. But these people can’t even service the interest. It’s a reflection that the economy is not so good that you’re seeing more and more defaults.”

According to industry experts, the rise in number of mortgage defaulters can be attributed to higher unemployment, a slower economy, a smaller number of buyers, as well as a shortage of tenants for properties bought by investors.

For this year, the sector that saw the highest number of retrenchments are the professionals, managers, executives and technicians (PMETs), who make up over three quarters of those retrenched in the second quarter of the year.

However, in spite of signs of a declining economy, there seems to be continued growth in the number of private homes being constructed, with 24,000 vacant units and another 44,000 planned to be built.

A report in early June said that there are 24,000 private housing units that are empty. Additionally there are 44,000 private housing units in the pipeline, made up of 39,000 unsold units from GLS plus another 5,000 units from sites pending planning approval.

The Ministry of National Development (MND) made an announcement on June 6, Thursday, that five confirmed list sites and eight reserve list sites yielding around 6,430 private homes, 92,000 sq m gross floor area (GFA) of commercial space and 1,100 hotel rooms had been released.

While the first half of the year’s GLS programme had 2,025 units of private homes from confirmed list sites, for the second half there were only 1,715 units, which is a reduction of 15 percent.

To address the problem of mortgage defaulting, the Credit Bureau urged would-be homeowners to plan their finances well.

A spokesperson from the Bureau said, “Singapore is a country that is constantly growing, and so is her population. Therefore, housing is constantly in demand and on the rise, which means that more and more people will take real-estate loans.

We strongly advise all consumers to plan their finances in advance, in order to prevent defaulting on their repayments to lenders later on.” -/TISG

Read related: 24,000 empty apartments around Singapore as government reports oversupply

24,000 empty apartments around Singapore as government reports over supply

 

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