Following the Monetary Authority of Singapore (MAS) decision to take further measures to cool real-estate prices, enough land to generate 14,300 private residential units has been released under the government land sales programme for the first half of 2011. However, a Financial Stability Review released by MAS afterward stated that low borrowing costs may cause property prices in the city-state economy to rise further if capital inflows persist at current levels. The central bank has warned that despite the cooling measures taken, transaction activity and prices could pick up again. Against this, the government will continue to focus on monitoring developments in the property market, and if required, establish additional measures to promote a sustainable property market.
With expectations of a sustained period of low interest rates, the MAS has warned that financial institutions may also be tempted to loosen lending standards to extend more loans, increasing the danger of overextended households and corporates when interest rates eventually rise.
While in another review following MAS’s decision to take more measures to cool real-estate prices, Chua Yang Liang, Head of Research South East Asia for Jones Lang Lasalle, stated, “Every city has their own policies, for Singapore we are not ruling out other measures that they could put in, but for now they continue to pump in the supply to keep sufficient supply to ensure prices are in check. Should prices continue to rise unabated, then of course they may continue to adopt further tightening measures on the demand side – loan to value ratio.”
In August, Singapore’s government asked banks to demand more upfront cash from home buyers with existing home loans. While the measures have had an effect, strong global liquidity and low interest rates have continued to fuel activity.
Watching the situation closely, analysts believe further government action will be necessary to rein in runaway growth.
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