Households financially sound, but cost increases are a worry

Singapore’s CPI rose to 4.7% on a year-over-year basis in October, from just 4.17% in September.

Looking at the CPI numbers, we can see that holiday spending ranked third in terms of annual growth – 7.8 percent – after private transport (11.7 percent) and alcoholic beverages and cigarettes (11.1 percent).

While core inflation, excluding private transport and accommodation, has risen to 3.3 Percent in October. It was only 3 Percent in September.

Singaporeans take advantage of a stronger local currency by spending more abroad.

A household which has a net worth that is positive will have more assets than liability, allowing it to be prepared for unexpected emergencies.

Savings form part of household assets while credit card bills are an example of liabilities.

In November, according to the latest Financial Stability Review of the Monetary Authority of Singapore, the average personal savings rates in Singapore decreased from 34.6% to 34.64% in the third quarterly.

The percentage is slightly above the long term average of 31 percent, but still 0.5 percent lower than it was a year ago.

The lower saving rate comes after a rise in consumption by private households of 8.4% per year, or $52.7bn in the last quarter.

The net worth of average households continues to grow. But, as costs rise, this may be threatened.

Bank loans are limited to 75 per-cent of the value, while Housing Board loans are limited to 80 per-cent.

The higher the ratio of loan to value, the harder it is for home owners in times of rising rates to refinance.

The Myst Floor Plan

Meanwhile, economists worry that lower-income household.

Poorer households tend to spend more on their basic needs, such as food and transportation.

While the Department of Statistics revealed that the average household’s net worth rose 7.6 percent in the 3rd quarter of 2023 from the previous year to $2.72 trilllion, they also showed that people were saving less. Credit card debt was also on the rise.

Net worth is what a household left with after it paid off its debts.

Increased spending has resulted in higher credit card balances.

According to household balance sheet information, the outstanding balance on credit cards was 4.2% of personal income. This was just 0.4 percentage points shy of the long-term average, which is 4.6%. The credit card debt also represented 3.8% of total household obligations.

The share of household debt in personal disposable income fell for the eighth quarter running, due to a combination lower levels of debt and continued robust income increases.

As home loans are the largest part of the average household’s debt, they represent 73.9%.

The maximum amount a homeowner can borrow in a mortgage loan is determined by a loan-tovalue ratio.

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