The central bank said low borrowing costs and excess liquidity globally may push the island’s property prices higher again, setting back government efforts to cool the market.
There is a risk that financial institutions may ease lending standards and extend more loans to make up for narrowing interest margins, the Monetary Authority of Singapore said in its Financial Stability Review today. Buyers may also take on “excessive leverage” amid expectations of a sustained period of low rates, the central bank said.
There is a risk that financial institutions may ease lending standards and extend more loans to make up for narrowing interest margins, the Monetary Authority of Singapore said in its Financial Stability Review today. Buyers may also take on “excessive leverage” amid expectations of a sustained period of low rates, the central bank said.
The government in August increased down payments for second mortgages and imposed a stamp duty on property held for less than three years to curb speculation. After leading 36 markets around the world in property-value changes in the second quarter in a Global Property Guide survey, government statistics showed price gains slowed in the three months to the end of September.
“There is a possibility that transaction activity and prices could pick up again given the current global conditions of flush liquidity and low interest rates,” the central bank said. “The government will continue to be vigilant in monitoring developments in the property market, and if necessary, adopt additional measures to promote a sustainable property market.”
Private residential prices rose 2.9% in the third quarter from the previous three months, when they climbed 5.3%, according to Urban Redevelopment Authority. Singapore’s government forecasts economic growth of 15% this year and expansion of 4% to 6% in 2011.
‘ESCALATING PRICES’
“As the property market is sentiment-sensitive, a pick-up in activity could lead to rapidly escalating prices,” the central bank said. “If economic recovery disappoints on the downside amidst continued uncertainties in the global economy and market confidence is dented, prices could fall. On the other hand, if the economic recovery continues apace, there could be widespread implications on buyers who overextended themselves when interest rates eventually rise.”
Asian markets including China, Hong Kong and Taiwan introduced measures including higher down payments on loans this year to cool their property markets amid concerns that asset bubbles are forming as home prices surge.
Hong Kong intensified its yearlong battle to curb prices with additional taxes last week, while Ba Shusong, a top Chinese cabinet researcher, said in a commentary in China Business News today that tougher property measures are needed in the country.
