SINGAPORE: The property market in Singapore has “substantially stabilised” over the last three years, but it is not time yet to ease the cooling measures, Monetary Authority of Singapore (MAS) managing director Ravi Menon said on Thursday (Jun 29).
Speaking at the release of MAS’ annual report for 2016/2017, Mr Menon said the cooling measures remain necessary amid strong demand for private residential properties from home buyers and investors.
Over the medium term, property prices are expected to be aligned with broader income trends in the economy, Mr Menon said.
Private residential property prices have declined by nearly 12 per cent over the last 14 quarters, following an increase of close to 60 per cent over 17 quarters.
Ultimately, he said, residential property purchases are financed by buyers’ income, which is dependent on GDP growth.
“If property prices increase faster than nominal GDP growth on a sustained basis, buyers would end up taking on more leverage than they can reasonably repay out of their incomes,” he said.
Mr Menon added that the adjustments by the Government earlier this year “do not signal the start of an unwinding of the property cooling measures”, but instead, were made for very specific reasons and purposes.
In March this year, the Government reduced the Sellers Stamp Duty holding period and lowered the rates, while mortgage equity withdrawal loans with loan to value ratios of 50 per cent or less were excluded from the Total Debt Servicing Ratio framework.
SEGMENTS OF ECONOMY REMAIN WEAK
Turning to the Singapore economy, Mr Menon said the country’s GDP is expected to grow 1 to 3 per cent this year, with a “strong likelihood” that it will be higher than the 2 per cent registered last year.
The growth has been somewhat uneven across sectors, but is expected to “gradually broaden to the rest of the economy”, he added.
While the trade-related cluster has been a major driver, he said the domestic-oriented cluster has had lacklustre growth and some segments are expected to remain weak.
The current neutral monetary policy stance, in place since April 2016, has helped stem disinflation pressures in the economy, Me Menon said.
MAS core inflation is projected to average 1 to 2 per cent this year, up from 0.9 per cent in 2016, while CPI-All Items Inflation is expected to come in at 0.5 to 1.5 per cent, up from -0.5 per cent last year.
Mr Menon said the current monetary policy stance “remains appropriate for an extended period”, in view of the stable inflation and growth prospects for 2017.
“The neutral policy stance should anchor inflation on a gradual ascent towards its historical norm and ensure medium-term price stability,” he said. “This policy is of course predicated on domestic inflation and growth prospects keeping to their projected trajectories.”