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Property cooling measures still necessary: MAS

SINGAPORE — Property cooling measures are still necessary as the underlying demand for private homes remains firm amid continuing low interest rates and foreign investors seeking good yields, the Monetary Authority of Singapore (MAS) said on Thursday (June 29).

SINGAPORE — Property cooling measures are still necessary as the underlying demand for private homes remains firm amid continuing low interest rates and foreign investors seeking good yields, the Monetary Authority of Singapore (MAS) said on Thursday (June 29).  

“Easing the measures now would send a wrong signal,” said MAS managing director Ravi Menon, noting that recent property launches here have seen good take-up rates and transactions in the first quarter of this year rose by almost 40 per cent compared with average quarterly transactions since the implementation of the Total Debt Servicing Ratio (TDSR) in 2013. 

“The risk of a renewed unsustainable surge in property prices is not trivial,” he cautioned, reiterating that cooling measures implemented by the Government since 2009 were aimed at promoting a sustainable residential property market and financial prudence among households.

Private residential property prices have declined by nearly 12 per cent over the last 14 quarters, following an increase of close to 60 per cent over 17 quarters, he noted. 

But with buoyant property markets in the region, and governments elsewhere also having introduced cooling measures in recent months, the Republic must guard against a spillover of investor demand into the market, he added.

“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,” Mr Menon told reporters on Thursday at the release of the central bank’s annual report for the financial year, referring to adjustments made to the Seller’s Stamp Duty (SSD) and TDSR in March. “The adjustments in March were made for very specific reasons and purposes,” he said.

The Government had shortened the holding period for the SSD and lowered the rates because speculative flipping of properties had declined significantly. In addition, mortgage equity withdrawal loans with loan-to-value ratios of 50 per cent or less were excluded from the TDSR framework to give home owners greater flexibility to monetise their properties for retirement needs.

Over the medium term, property prices should be aligned with broader income trends in the economy, he added. “If property prices increase faster than nominal GDP growth on a sustained basis, buyers will end up taking more leverage that they can reasonably repay out of their incomes,” he said in a wide-ranging press conference where he also spoke about how Singapore has begun restoring its reputation as a financial centre following the hit it took with the uncovering of transactions here linked to the 1MDB scandal. 

Analysts said the MAS’ stand on the cooling measures is not a surprise. 

“With pressures coming from a rising interest-rates environment, the last thing the market needs is a knee jerk reaction to undermine all the efforts over the past few years to keep the residential market at an affordable level as well as in relatively financial health,” said Mr Desmond Sim, head of CBRE Research for Singapore and South-east Asia.

At the briefing, Mr Menon also highlighted that the MAS made a record net profit of S$24.3 billion for the financial year, and it would maintain its underlying investment approach, which is “conservative and emphasises steady, long-term returns”. 

The managing director also emphasised that “upholding high standards of integrity” would remain a priority for the central bank, as it seeks to “restore” Singapore’s reputation as a “clean and trusted financial centre” after the fallout from the 1MDB saga.

“We have taken tough and unprecedented enforcement actions and sent an unequivocal message that the MAS will not tolerate the criminal abuse of Singapore’s financial system,” he said.

While the MAS takes a “tough, no-nonsense” stance as a regulator, it would adopt a “progressive and proactive” approach in developing the financial sector, he added. 

Measures include strengthening the venture capital and private equity financing ecosystem, strengthening Singapore’s value proposition for Asian companies to issue bonds, and to expand the industry’s capacity to finance Asian companies’ international trade activities.

Despite the slowdown in the financial sector, about 2,800 new jobs were created last year, said Mr Menon. “Beyond managing wealth, financing companies, providing insurance and creating markets, the financial sector must create good jobs for our workforce,” he said. To that end, the MAS is working with financial institutions to identify early on jobs that might be at risk in the future, and will work with financial institutions to “proactively upskill” workers through professional conversion programmes.

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