How Dangerous Is Singapore's Soaring Household Debt? ....

...This island state, which is an important financial hub, has among the highest level of household borrowing relative to GDP in Asia at 77%, rising from around 64% in 2007. Home loans, which account for around three quarters of household debt, have grown rapidly in recent years together with a booming property market.

Now with bond yields beginning to climb ? the 10-year Singapore government bond yield has risen to 2.5% from 1.4% in May ? concerns are growing over whether there is a debt bubble in the making.

...

" It's definitely a concern, any country that has household debt at a high level will face problems when interest rates go up," said Baig. " While there may not be bankruptcies, there will be a transition that entails some pain."

Within Asia, Singapore ranks just behind South Korea and Malaysia whose household debt levels stand at 88% and 80.5% of GDP, respectively.

...

Household financial assets ? which include currency, bank deposits, shares and securities ? have risen to 86% of GDP from 72% in 2007.

" I think household sector balance sheets are strong ? so it's not a concern around solvency," said Wan. " When interest rates do rise, households will have to pay higher monthly mortgage payments as portion of income - not just for housing but to service car loans. This could crimp private consumption ? I think that's where the risk is, " he said. Private consumption makes up around 40% of the country's GDP.

...