Real Estate

Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

Global asset markets may not be taking Janet Yellen's warnings on rate increases too seriously, but Singapore got Fed-ready Friday with the surprise announcement that the city is easing property curbs.

Starting in 2009, those restrictions on buying, selling and financing real estate came in waves of increasing severity after Singapore found its open economy inundated with cheap money printed by Western central banks. Seven years later, it seems the so-called "macroprudential" measures have already done their job -- probably a bit too well.

Slump Over?
Home prices dropped for 13 consecutive quarters in the wake of stricter curbs in 2012 and 2013
Source: Bloomberg; Urban Redevelopment Authority

Unlike in Hong Kong, where a glut of Chinese liquidity blunted the edge of cooling measures and kept real estate on the boil, 13 consecutive quarters of drops in Singapore home prices were causing a different problem. The island's three homegrown banks were starting to look threatened, just as they struggled with outsized losses on loans to domestic rig-builders and corporate borrowers in Singapore, Hong Kong and China.

Housing loans comprise almost 15 percent of bad debt at Oversea-Chinese Banking Corp., and make up a little less than 19 percent of soured loans at United Overseas Bank Ltd. Property is the collateral in 37 percent of secured nonperforming assets reported by DBS Group Holdings Ltd.

Still Too Low
Singapore interbank rates have risen too slowly compared with U.S. dollar borrowing costs
Source: Bloomberg

Friday's measures won't open the floodgates to speculators. For one thing, there's no relaxation of buyers' stamp duty, which at 15 percent is prohibitive for foreigners. And flipping is still discouraged: Sales within a year of purchase will invite a 12 percent sellers' stamp duty, down from 16 percent.  Even so, shares of large builders such as City Developments Ltd., Capitaland Ltd. and UOL Group rose between 2 percent and 6 percent after the announcement. Bank stocks didn't do much, because loan-to-value limits on mortgages remain in place, and a cap on a borrower's debt-to-income ratio is being relaxed only slightly. 

Now that the cycle has turned, there may be more substantial easing on the way.

Yellen's Federal Reserve may set the pace for those tweaks. Singapore's interbank interest rate, a benchmark for mortgage costs, is still only 0.94 percent. As rates increase in the U.S., what for now looks like a soft landing in the island's property market could end up being bumpy. By buying a bit of insurance against a jolt, Singapore is signaling that it's ready for a hawkish Fed.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. The levy will fall to zero after a three-year holding period, down from four years earlier.

To contact the author of this story:
Andy Mukherjee in Singapore at

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