Photographer: Darren Soh/Bloomberg

Singapore's MAS Says Property Cooling Measures Still 'Necessary'

  • Adjustments made in March not a sign of unwinding of measures
  • Authorities imposed curbs on property market since 2009

Singapore’s central bank said it’s not yet time to ease property curbs and the adjustments made by the government in March don’t signal an unwinding of the measures.

While the property market has stabilized, “it is, however, not time yet to ease the cooling measures. They remain necessary,” Ravi Menon, managing director of the Monetary Authority of Singapore, told reporters on Thursday at the release of the bank’s annual report. Mortgage rates are very low and “the risk of a renewed unsustainable surge in property prices is not trivial,” he said.

The city state’s government imposed a number of restrictions beginning in 2009 to cool a red hot market, causing prices to decline for more than three years. It relaxed some measures in March, but left most of the restrictions in place.

“The calibrated adjustments by the government earlier this year do not signal the start of an unwinding of the property cooling measures, as some commentators have suggested,” Menon said.

Read More: How Singapore Cooled Its Red-Hot Property Market: QuickTake Q&A

In March, the government reduced stamp duty imposed on sellers and some mortgage restrictions. That helped stoke optimism that Singapore’s property market is rebounding, with home sales jumping and developers making more aggressive bids at land auctions. Redevelopment deals, where a group of homeowners band together to sell entire apartment blocks at a hefty premium, have also made a comeback after slowing to a trickle in the past three years.

Menon said investors are still searching for higher yields and safety in property markets around the world and authorities across the region, including in Hong Kong, South Korea and New Zealand, have tightened restrictions recently.

“We must be vigilant that tightening measures elsewhere do not lead to spill-over of investor demand into the Singapore market,” he said. “Easing the measures now would send a wrong signal.”

Singapore was ranked ninth among the world’s top global cities for real estate investors, trailing only Hong Kong in Asia, according to asset management firm Schroders.

Trade Outlook

Weiwen Ng, an economist at Australia & New Zealand Banking Group in Singapore, said an easing in property curbs may only happen if interest rates rise significantly, increasing the burden on homeowners.

“Property prices haven’t really collapsed to a level that warrants an easing per se,” he said. “We’re seeing a slight easing in property prices but it hasn’t corrected to the level necessary for anything to take place.”

The index tracking 42 real estate stocks in the city-state rose 0.7 percent as of 1:57 p.m. in Singapore trading, compared with the 1.2 percent gain in the benchmark Straits Times Index.

In its annual report, the MAS said it will closely monitor the recovery in global trade, which has helped to spur growth in the export-reliant economy. The central bank “will be keeping close watch on the sustainability of the cyclical upswing” and the “the unevenness in performance among domestic corporates.”

Singapore has benefited from a rebound in exports since the end of last year but two consecutive months of contraction have raised concerns over whether the recovery can be sustained. Demand from Chinese consumers and manufacturers, which has been a key driver for the strong growth in Asian exports this year, may moderate as authorities seek to curb debt.

Menon said economic growth in the city state may exceed last year’s expansion of 2 percent, in line with the government’s forecast, mainly due to a pick-up in trade and financial services.

The MAS, which uses the currency as its main tool rather than interest rates, stuck to its neutral policy in April. Menon said the “stance remains appropriate for an extended period in view of the stable inflation and growth prospects for 2017.”

— With assistance by Sree Vidya Bhaktavatsalam

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