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‘Too early’ to ease property cooling measures: MAS

Property prices have risen 60 per cent over the last four years but have declined by just 3.3 per cent over the last three quarters, MAS says.

SINGAPORE: The property market may be stabilising but it is still "too early" to ease the cooling measures that were introduced in recent years, the Monetary Authority of Singapore (MAS) said on Thursday (July 24).

This is because home prices remain elevated while global interest rates are at historical lows, MAS Managing Director Ravi Menon said.

Speaking at the release of MAS' annual report for the 2013/14 financial year on Thursday (July 24), Mr Menon said property prices have risen 60 per cent over the last four years but have declined by just 3.3 per cent over the last three quarters.

He also said relaxing property measures at a time of low interest rates may set off another spiral of price increases.

"The prices are just beginning to soften,” said Mr Menon. “Levels of prices remain very high, interest rates remain very low, debt levels remain high for the highly leveraged households. It will take time for this to adjust, some further adjustment in prices is not unexpected; we will watch very closely supply and demand conditions - not just levels. but also changes; we will look very carefully at the credit and liquidity environment and a variety of other factors to make a continual judgement.

“As I stated, the objective is not to see a collapse in prices but at the same time to have an orderly correction and stabilisation of the market which is now beginning to take place.”

MAS says the property-related measures have helped to strengthen household balance sheets. The increase in household debt has moderated from about 13 per cent year-on-year in the third quarter of 2011 to 5.5 per cent in the first quarter of this year.

Some Singapore households remain highly leveraged, and they would need time to reduce their debt levels, he added.  
Mr Menon said the measures introduced to cool Singapore's housing market can be divided into two categories – structural measures such as the total debt servicing ratio which are meant for the long term, and cyclical measures such as loan-to-valuation limits and stamp duties that can be "recalibrated according to market conditions".

On the whole, it would be premature to ease property cooling measures now as it was important to secure the gains made in stabilising the market and restoring financial prudence.

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