SINGAPORE, Dec 1 — With wages depressed due to the weak labour market, household debt in Singapore as a percentage of income is expected to rise slightly in the near term, said the Monetary Authority of Singapore (MAS) today.

Household debt has been twice that of income and remained stable at that level since 2015. 

While household debt overall has continued falling since the last round of property cooling measures were introduced in July 2018, MAS said in its annual financial stability review that the proportion of household debt out of Singapore’s gross domestic product (GDP) has risen. 

Household debt-to-GDP was 67.1 per cent in the third quarter of this year, up from 65 per cent in the second quarter and 63.1 per cent in the first quarter. 


This is because nominal GDP fell by 10.4 per cent in the third quarter of this year, compared with a year ago, a far larger drop than the 2.5 per cent decline in aggregate household debt over the same period. 

Even though household balance sheets remain resilient overall, MAS said that those who are highly leveraged or were employed in sectors severely impacted by the Covid-19 pandemic would be more vulnerable. 

Given how the uncertain outlook may affect income streams, MAS called for households to remain prudent in taking up new debt and in committing to property purchases.


“Whenever possible, they should continue servicing or consolidating their existing obligations, which would be useful to enhance resilience against any unexpected shocks,” said MAS in its report. 

The property market in Singapore has remained largely resilient, with prices increasing 0.8 per cent in the third quarter of 2020, compared with the previous quarter. 

MAS said that new housing loans have remained stable, and the growth of outstanding loans is actually declining. 

The credit risk profile of housing loans is also still sound. 

However, MAS warned that credit risk for housing loans could increase if the economic downturn resulting from the Covid-19 pandemic persists. 

The labour market is likely to remain weak in 2021, with resident unemployment expected to remain higher than normal. 

The unsecured credit charge-off rate, a leading indicator for the credit quality of housing loans, crept up in the third quarter of this year, suggesting that more home owners could face difficulties in meeting their mortgage payments, MAS said. 

Given that housing loans take up the biggest portion of total household debt at 75 per cent, MAS said close monitoring of housing loans from vulnerable households will be necessary in the months ahead. — TODAY