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Central bank ready to curb soaring property prices in Singapore

Demand for properties has experienced strong growth and unchecked price gains may expose the property market to risks in the global economy, the Monetary Authority of Singapore said in its latest Financial Stability Review.

It called for close monitoring of residential property prices and transactions.

This comes after property prices rose 15.8% in the third quarter of this year, the most in 28 years, after dropping 25% in the previous four quarters.

Singapore has already barred interest only loans for some housing projects and stopped allowing developers to absorb interest payments for apartments that are still being built.
The government is releasing more land for sale in the first half of next year as part of measures to prevent excessive price swings in the property market.

‘Despite the lingering uncertainties in the domestic and global economy, domestic property market activity has taken on its own dynamic.

The risk of a renewed escalation of speculative momentum cannot be discounted.

The nature and timing of further measures, if deemed necessary, would have to be balanced against the still uncertain path of economic recovery, the central bank said in a statement.

Low borrowing costs and the island’s recovery from its worst recession in more than four decades aided the rebound in home prices, the central bank said.

‘Should growth turn out weaker than expected, property buyers and speculators could face capital losses as the market corrects.

Conversely, if the recovery stays on course, interest rates will eventually rise and drive up financing costs with severe implications for those who have overextended themselves,’ it continued.

Asian countries are now fighting rising real estate values which threaten to mimic the US mortgage bubble that sent the world economy into crisis, according to Robert Prior-Wandesforde, senior economist at HSBC in Singapore.

‘Policy makers are trying to learn the lessons from the US crisis.

A lot of central banks are now taking a more pre-emptive approach to bubbles and potential bubbles.

That’s quite a sensible approach,’ he explained.