Sunday, September 04, 2011

Debt Watch - Singapore

Following in the footsteps of the debt master Professor Steve Keen, I am starting an amateur analysis of Singapore's debt levels and debt trends.

The first chart for analysis is a plot of Singapore's consumer housing debt - as extended by banks (data from MAS) vs Singapore's GDP (singstat). I am able to get only four data points from singstat for GDP (if anybody knows how i can get a more detailed time series pls let me know), nevertheless a plot of housing debt vs. GDP shows a clear trend:

There is a major omission from this chart, and that is the debt that is extended by HDB to purchasers of HDB flats. MAS only releases data of loans made by banks, and not loans made by HDB. So we have to use educated guessing estimate the HDB debt. (if anybody knows how i can get my hands on this data, please let me know. thanks)

Now, we know that about 70% of all Singaporeans live in HDB flats, and that 676,485 out of a total of 1,145,920 households in Singapore fall under the $8,000 per month household income bracket (as of 2010 Singstat census of population). It is a safe to presume that >90% of these households have taken a loan from HDB for their flat, which makes HDB the largest creditor in Singapore with respect to housing debt, and also means that a vast portion of total mortgage debt in Singapore is not captured in the MAS data.
I hazard a guesstimate that the total amount of HDB debt amounts to perhaps around 30% of total housing debt (i.e. housing debt extended via the banking sector is about double the HDB debt), since
  1. wealthier households generally have more expensive housing hence their loans will be correspondingly larger than the less well off
  2. wealthier households may have investment properties meaning that the amount of mortgage debt that they take on could be multiple times larger.
With this guesstimate, the adjusted housing debt / gdp chart is as follows:

The trend is clear. Housing debt as a proportion of GDP has been consistently on the rise since 2007.

In fact, if we plot a chart of bank housing debt from 2000 and do some numbers, we see that housing debt has exploded a staggering 30% per annum for the last 11 years, far outstripping GDP growth rates.

As for the absolute level of housing debt/gdp, it currently stands at about 50%, as per my estimations of HDB debt. This is still relatively conservative compared to Australian mortgage debt/gdp levels, which are around 90%, according to Steve Keen.

However, a few notes about this:

1. A large proportion of GDP goes to corporations rather than wage earners in Singapore, I think somewhere in the region of 50%, compared to other countries where the proportion of GDP going to wage earners is much higher.

2. Singapore has a lot of foreign workers in the country who do not purchase housing in Singapore but instead who rent, like they normally would if they were working in their home country/city. This artificially inflates GDP relative to mortgage debt compared to other jurisdictions where the vast majority of the workforce are indigenous workers who own a home in the location where they work.

I will attempt to adjust for these issues in future blog posts.

1 comment:

contrarian said...

It's on the HDB's balance sheet under loans receivable. See the notes to the accounts explaining loans receivable for more details.