GOVERNMENT MONITORING SITUATION, POISED TO STEP IN IF MARKET OVERHEATS
For the second time in eight months, Singapore’s currently hot property market has been put on notice. The island republic’s central bank warns that a bubble is building up and is already cautioning developers, financial institutions and home buyers to “proceed with care”.
According to the Business Times in Singapore, market watchers say the warning signals being sent out by the authorities are a reality check that confirms that the government will step in if the market overheats.
The latest reminder comes from the managing director of the Monetary Authority of Singapore (MAS), Ravi Menon, who pointed out that the “euphoria” and “excessive exuberance” being seen in the market today could pose a threat in terms of skyrocketing land prices and oversupply of housing stock.
Speaking at a MAS annual report media briefing this Wednesday, Menon said the Ministry of National Development and the Ministry of Finance are also closely monitoring developments in the residential property market to ensure market sustainability.
MAS urged developers to be cautious in their land bids, bearing in mind the supply that’s coming on-stream. It has also been actively warning buyers.
“We’re telling individuals who purchase property to be careful. Interest rates are rising, be cautious of debt servicing burdens, avoid taking on too much leverage when buying a house,” Menon said.
“We’re also telling the banks to be careful when underwriting, there’s euphoria now, everything looks good.”
However, when underwriting, banks should also stress-test for future scenarios, Menon added.
For now, the warning is intended to have a sobering effect, he said, so that everyone exercises balanced and good judgement.
“We need to be mindful of the supply and demand dynamics and we have to ask ourselves whether demand will be able to match the big supply that’s coming onstream in the next few years,” said Menon.
Currently, Singapore developers have been aggressive bidding for both en-bloc sale tenders and government land sales (GLS). This is expected to more than double the number of units available in the near term. If left unsold, this could result in a supply imbalance and weigh on the market.
The Urban Redevelopment Authority (URA) recently reported that there are around 20,000 units of GLS and en-bloc sites in the supply pipeline GLS and en-bloc sites that are pending planning approval. This is in addition to the 24,000 unsold units from projects with planning approval.
The Business Times said prices of private housing have increased by 9.1 per cent since the trough in Q2 2017. This has mostly offset the cumulative price decline of 11.6 per cent during the four-year period between mid-2013 and mid-2017.
As at the start of the week, the URA’s overall private residential price index is just 3.6 per cent below its last peak of Q3 2013.
The number of property transactions over the last 12 months was around 25 per cent higher than in the previous 12 months, and new housing loans in Singapore have risen by 34 per cent year-on-year over the last 12 months.
“We welcome the recovery. Why would anyone want the property market to continue sliding? But it needs to recover in line with economic fundamentals, not ahead of income growth,” said Menon. – P360
This story has an update. Read here.