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Housing picks up in Singapore
SINGAPORE (Reuters) -- A pick-up in economic activity and property purchases in Singapore lifted bank lending for a sixth straight month in August, central bank data shows. But analysts said Tuesday that demand looked set to cool. The end of Singapore's outbreak of Severe Acute Respiratory Syndrome (SARS) in May released pent-up demand, spurring purchases of homes and cars. Low interest rates also helped as banks fought to secure loans, economists said. "We started to see a pick up in the wider sectors apart from housing loans from June and July. This indicates that a recovery is there," said United Overseas Bank economist Low Ping Yee. But a three percent wage cut from October 1 -- part of reforms to the government's compulsory retirement savings scheme, the Central Provident Fund (CPF) -- and rising unemployment are likely to rein in demand, Low added. Analysts say the pension changes could hit the housing sector hard. As well, the amount of bad debt on credit cards rose in August, raising questions about the effect of rising joblessness. Bank lending rose 0.4 percent to S$165.9 billion ($95.8 billion) from S$165.3 billion in July, and was up 2.3 percent from a year earlier, the Monetary Authority of Singapore said. The figures were adjusted for a bank merger. The bulk of the increase was due to continuing growth in housing loans, the central bank said, although lending to most other sectors such as manufacturing, building and construction and general commerce also rose. Housing loans posted the largest gain of S$815 million compared with the previous month. After suffering its worst quarterly economic contraction on record in the second quarter due to fallout from SARS, Singapore's $89 billion economy is stirring back to life with a modest rebound in services, consumer spending and factory output. The biggest change to the pension scheme is a cut in the CPF contribution rate from employers to 13 from 16 percent. Consumers can access their CPF savings for home loan payments and the cut means many will need to find cash from elsewhere, eroding their spending power by hundreds of dollars a month. Central bank data also showed that confidence was low among consumers as rollover balances held on credit cards rose 1.2 percent to S$2.47 billion in August from S$2.44 billion in July. Bad debts written off by banks in Singapore on their credit and charge cards jumped nearly 11 percent to S$15.7 million in August from S$14.2 million in July, which analysts linked to rising unemployment. The government has said the jobless rate of 4.5 percent at the end of June was expected to climb to 5.5 percent this year.
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