http://www.straitstimes.com/archive/...arman-20130711
Property market stabilising but curbs will stay: Tharman
He says US stimulus withdrawal will not pose fundamental risk to region
Published on Jul 11, 2013
PROPERTY prices in Singapore are starting to stabilise but the Government is not ready to take its foot off the property market brakes, said Deputy Prime Minister Tharman Shanmugaratnam.
"Our intention is to stabilise the market, if possible have some softening of prices," he told Reuters in an interview yesterday.
"Longer term, our intention is to try as best as we can, although it's difficult, to have prices not run away from incomes, which means that on a trend basis, we would like to see some stability in prices relative to median incomes especially."
After seven rounds of cooling measures since 2009 and a move last month to cap Singapore home buyers' debt payments relative to their income, Mr Tharman said the property market is showing signs of calming down.
"The market as a whole is seeing some stabilisation," said Mr Tharman, who is also Finance Minister and the Monetary Authority of Singapore (MAS) chairman.
"We're not ready yet to lift our measures or ease up on our measures, so we're watching the market and have to make judgments without announcing our policy moves well in advance."
Singapore's private home prices have risen more than 60 per cent over the last four years on the back of record low interest rates and copious capital inflows, fuelling concerns about affordability for first-time buyers.
As prices rose, households have also taken on more property debt, raising concerns about pockets of over-leverage being exposed when interest rates rise.
The MAS last month set new rules to restrict a home loan applicant's total monthly debt repayments to 60 per cent of income.
The move comes after a series of property curbs which the authorities have aimed at "preventing a full-scale bubble from being formed because that can only crash, but at the same time not overreacting in one set of moves," said Mr Tharman.
He said a recent slowdown in property price appreciation was "more than temporary" and was a "response to our measures".
The rise in private home prices slowed to under 1 per cent in each of the last two quarters, while Housing Board flat resale prices grew 0.5 per cent in the second quarter this year, the slowest rate since the first quarter of 2009.
Curbs recently imposed on foreign home buyers, such as higher stamp duties, are meant as a disincentive rather than an outright restraint, Mr Tharman said.
"It's not a closed-door policy because Singapore has to remain an open market," he said. "But we've put some sand in the wheels, a fair bit of sand in the wheels, and it's having some effect at the top end."
Mr Tharman added that rich foreigners are picking up properties here to seek higher returns, not to squirrel away money from authorities at home.
"Most of the demand for property in Singapore has been a search for yield rather than a search for a place to keep ill-gotten money," he said.
In the interview, Mr Tharman also spoke about South-east Asia needing to manage volatility as fund inflows reverse direction on the back of the United States Federal Reserve winding down its monetary stimulus.
But he said the region is "fundamentally more resilient" and its banking systems are stronger than before the Asian financial crisis.
"Both the injection of liquidity that came with quantitative easing and the potential withdrawal are discomforts but are not going to pose fundamental risks."
Mr Tharman also warned that markets "may be a little too optimistic" about the US recovery, as it was not yet clear whether the economy can return to sustainable growth of at least 2.5 per cent.
Meanwhile, he urged the US and Europe to align their rules more closely on financial regulation or risk undermining the global economy.
"We need something closer to harmonisation," he said.
"If you look at many advanced countries today, compared to five years ago, things have gotten more domestic and less international and that's a risk for the global economy, whether it's financial regulation or other matters."
Lastly, Mr Tharman said Singapore does not want to play the role of a booking centre for profits made in other countries.
"We have no economic benefit in Singapore from attracting profits from the rest of the world to take advantage of low taxes in Singapore. There is no domestic value added, and it's domestic value added that matters to us."
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