Property prices may fall further, but crash unlikely, says Tharman

SINGAPORE — Property prices in Singapore may decline further, but a market crash is unlikely as the Government had introduced cooling measures early to quell any potential housing bubble, Deputy Prime Minister Tharman Shanmugaratnam said yesterday.

“I don’t think the (property) cycle is over. The market determines the cycle and the Government has put in place rules and stamp duties. We’ve also pumped in a fair bit of supply into the market. But market players will determine where the cycle goes,” he said at the DBS Asian Insights Conference.

His comments came after Urban Redevelopment Authority data on Tuesday showed private home prices fell for the third straight quarter in the three months ended last month, as curbs such as the Total Debt Servicing Ratio (TDSR) introduced last year continued to dampen market appetite and force developers to slash prices. Private home prices fell 2.3 per cent in the first half of the year.

“But I don’t think we’ll see a crash, because we moved early enough. And we moved each step of the game, knowing full well that what we do may not be enough, but if too much we might engineer a crash,” said Mr Tharman, who is also Finance Minister and chairman of the Monetary Authority of Singapore.

“So, we started early, moved step by step and avoided a huge bubble in the market. That’s why we won’t see a crash. But I think further correction will not be unexpected,” he noted.

The Government introduced its first round of cooling measures nearly five years ago when it put a stop to the Interest Absorption Scheme in September 2009. It has since launched multiple rounds of cooling measures, including additional stamp duties, tightened mortgage servicing ratios and the TDSR to curb runaway housing prices.

During the conference, Mr Tharman urged the nation to remain focused on economic restructuring and raising productivity. “We have to move from being an upper-middle-income economy to a truly advanced economy. That’s not just a matter of dictating wages. We really have the opportunity of investing in the skills and ingenuity of Singaporeans, as well as unleashing the entrepreneurial energy,” he said.

“It doesn’t happen quickly, sometimes it happens in spurts, but I believe if we stay on course — keep the labour market tight (and) provide strong incentives for companies to upgrade — then entrepreneurs will come forward and some firms are going to innovate in ways that will knock out competitors. That’s when productivity really changes,” he said.

“The Government can’t create it or summon it up. But we can provide the conditions that encourage the restructuring and reward the winners — even if we lose some companies or some industries,” he added.