Companies deleveraging while households gear up to buy property: MAS review

by Albert02

Companies deleveraging while households gear up to buy property: MAS review

Companies deleveraging while households gear up to buy property: MAS review. In its annual Financial Stability Review issued on Friday, the Monetary Authority of Singapore stated that the unwinding of pandemic-induced precautionary buffers has made Singapore’s firms, households, and banks more financially vulnerable this year.

MAS expects all three sectors to be resilient in the face of potential global macro-financial shocks next year, but has detected areas of risk among highly leveraged families and smaller businesses. According to the MAS, the Singapore economy would contract to a “below-trend pace” in 2023 as a result of weakening foreign demand, high inflation, and tighter financial conditions. Climate change and cryptocurrency assets have also been identified as emerging threats. Flooding might cause major losses for banks and insurers in the Asean-5 economies of Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

Meanwhile, the ease of access to crypto assets increases the potential for cross-border capital flight and crypto ecosystem shocks to spread through the traditional financial system. The expansion of decentralized finance may increase the amount of unregulated financial services activities in the economy.

Meanwhile, despite rising loan rates, private residential property values have continued to climb. This is due to high underlying demand and purchasing power. Property prices increased by an average of 2.7% quarter on quarter in 2022, exceeding the average gain of 2.6% in 2021, with properties in the OCR experiencing the fastest growth. Transaction volumes were 10% higher than before Covid-19, but have already begun to decline from recent highs in 2021.

Strong leasing demand reduced the overall vacancy rate in Q3 to 5.7%, well below the 10-year average of 6.8%, while rental prices rose across the board. According to MAS, the increase in newly constructed private residential units will relieve some of the rental market’s pressure.

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