Rising costs are causing concern among Singapore households

The possibility of a housing market downturn following months of rising prices is a cause for concern. Since home loans represent the majority of household debt (73.9%), it’s important to be aware of this potential.

The loan-to value ratio is used to determine the maximum amount of money a family can borrow on a home loan.

A bank loan can only be up to 75 per cent and a Housing Board loan 80 per cent.

When property values are down, the loan-to-value is higher. This can make it difficult for home owners who want to refinance during a rising rate environment.

The average household is financially sound, and the net worth of the household continues to increase. However, if the cost of living continues to rise, this could put pressure on the household.

Data from the Department of Statistics shows that while household net worth increased 7.6 per cent in the third-quarter of 2023 compared to the same period last year, people also saved less and their credit-card debt was on the rise.

A household’s net worth is how much money it has left after paying all of its debts.

The lower income households are a concern for economists.

In October, the CPI showed that holiday costs were up 7.8% compared to the previous year. They ranked third behind the private transport sector (11.7%) as well as alcoholic beverages and tobacco (11.1%).

The poorer household spends a larger fraction of its income on basic necessities such as food, utilities and transport.

Singaporeans are spending more overseas due to the stronger local currency.

Grand Dunman ebrochure

A household with positive net worth will have more assets and liabilities than liabilities. It can therefore be protected against unexpected emergencies.

The decrease in the savings rate is due to a rise of 8.4 percent year-on year in private consumption in the third quarterly, which reached $52.7 billion.

Singapore’s CPI (consumer price index) for all items rose by 4.7 per cent compared to September, up from the previous 4.1 per cent.

In October, core inflation (excluding accommodation and private transportation) increased from 3% to 3.3 %, up from 3% in September.

As a result of the rise in credit card spending, outstanding balances have increased.

Credit card debt accounted for 3.8 percent of the total household liabilities according to data from the latest household balance sheets.

The trend in total household liabilities as part of the personal disposable income was lower for the eighth consecutive quarter due to the combination between lower debt levels, and continued robust growth of income.

Savings is part of an individual’s household assets. However, credit card debt can be viewed as a liability.

In November, statistics from the Monetary Authority of Singapore (MAS)’s Financial Stability Review revealed that the average Singaporean personal savings rate fell to 34.6% during the third quarter.

Although this is higher than the long-term median of 31 percent, it’s still down 0.5 points from the previous year.

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