Additional steps to cool property market, if necessary: Tharman

[mr funny]

http://www.straitstimes.com/Singapor...ry_606229.html

Nov 23, 2010

parliament

Additional steps to cool property market, if necessary: Tharman


THE Government is keeping a close watch on the property and financial markets as the buoyant Singapore economy - along with others in Asia - becomes a magnet for money in search of good returns.

If necessary, additional steps will be taken to keep property prices from soaring, said Finance Minister Tharman Shanmugaratnam yesterday.

He also assured Singaporeans that there was no need to worry about the negative impact of these capital inflows because Singapore's financial markets can manage them efficiently.

In essence, the financial system here is able to take what is needed for domestic consumption and 'recycle' the excess liquidity back into foreign markets, he said.

Mr Tharman made these points in his reply to MPs worried about the impact of the new United States policy to spur its dormant economy. Those who raised their concern included Mr Liang Eng Hwa (Holland-Bukit Timah GRC) and Nominated MP Teo Siong Seng.

The US Federal Reserve said recently that it would inject US$600 billion (S$779 billion) into the economy by buying long-term US Treasury securities.

This round of quantitative easing has unsettled many developing countries, which say the capital flows into their economies are pushing up home and stock market prices.

Some analysts have warned that this 'hot money' is destabilising as it could create speculative bubbles reminiscent of those created in many Asian countries during the 1997 Asian financial crisis.

Mr Liang echoed these concerns and asked if Singapore should be worried about these liquidity inflows, as they could do an about-turn and flow out just as quickly.

But Mr Tharman noted that while much attention has been focused on this latest round of quantitative easing, the basic reason for the capital inflows is the difference in growth between the developed and developing countries.

Investors in low-interest-rate developed countries move their money overseas in search of better yields for their capital, he said.

'That's a problem we have to address for some time to come. It means that we have to be vigilant about property market bubbles and take further action where necessary,' said Mr Tharman.

Singapore's financial markets are also deep enough to deal efficiently with such flows, he added.

This is because the financial system has a way of 'intermediating these flows, so that what is not needed domestically tends to get recycled overseas', he said. 'Nevertheless, we are closely monitoring the impact of capital flows on the economy and especially our asset markets.'

Noting the volatility of these inflows, he said the Monetary Authority of Singapore had taken into account this volatility in global financial markets in its latest policy move last month, 'which involved a widening of the band in which the Singdollar exchange rate can fluctuate'.

�He ruled out introducing capital controls but said the Government will continue to rely on a range of tools to ensure the flows do not threaten financial stability or cause a property market bubble.

Citing a series of cooling measures in the property market, Mr Tharman said the Government will do more if necessary: 'The Government will continue to monitor the situation closely and take additional steps, if necessary, to ensure financial stability and sustainable asset markets.'

AARON LOW

[mr funny]

http://www.todayonline.com/Business/...roperty-bubble

Guarding against property bubble

Govt will take additional steps, if necessary, to ensure sustainable asset markets: Shanmugaratnam

by Ryan Huang Wenwu

05:55 AM Nov 23, 2010


SINGAPORE - The Republic needs to be "vigilant about the possibility of a property market bubble and take further measures where necessary", Finance Minister Tharman Shanmugaratnam said yesterday.

He was responding to queries in Parliament over the possible effects on Singapore of the latest round of quantitative easing by the United States Federal Reserve.

The Monetary Authority of Singapore has "got a good handle" on the situation, and the Government is "not fundamentally concerned" about "stability in the financial system", Mr Shanmugaratnam said.

But the Fed's proposed US$600 billion ($778 billion) programme is likely to push more capital flows into Asia as investors go on a search for better yields. This is expected to be a "problem" Singapore will "have to address for some time", Mr Shanmugaratnam said.

"The Government will continue to monitor the situation closely, and take additional steps if necessary, to ensure financial stability and sustainable asset markets," he said.

"We are more concerned about property prices rising too quickly, too far, and our three rounds of measures so far has been aimed at injecting some stability in that process."

The Singapore Government is "not contemplating introducing capital controls, but will continue to rely on a wide range of policy tools to ensure that capital flows do not threaten financial stability or cause a property market bubble", Mr Shanmugaratnam added.

The pre-emptive moves that have been taken so far include three rounds of measures to cool speculative fervour in the real-estate market. The latest guidelines, which came into force on Aug 30, have made it mandatory for property buyers with one or more outstanding housing loans to pay more cash upfront.

Other policy tools that have been used include the tightening of monetary policy in October by the central bank.

The exchange-rate band for the Singapore dollar was adjusted to allow for slightly steeper appreciation of the currency; it was also widened a little in view of more volatility in global markets. The monetary tightening is also expected to help damp imported inflation amid concerns over global shortfalls in crop production.

Inflation will accelerate to around 4 per cent by the end of this year, before moderating to about 2 per cent in the second half of next year, Mr S Iswaran, Senior Minister of State in the Ministry of Trade and Industry, told Parliament.

"Cost pressures are growing, reflecting the high level of economic activity in Singapore," Mr Iswaran said.

"Notably, the cumulative rise in employment has led to some tightening in Singapore's labour market. At the same time, food price inflation is expected to accelerate over the next few months, given the spate of weather-related supply disruptions in various parts of the world."

Mr Iswaran also emphasised the need for workers and companies to play their part in raising productivity to help mitigate the inflationary effects of wage increases in a tightening labour market.