Too early to relax property curbs: MAS

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http://www.straitstimes.com/archive/...s-mas-20140725

Too early to relax property curbs: MAS

Risks remain, it says; modest pick-up in overall economic growth expected

Published on Jul 25, 2014 12:50 AM

By Yasmine Yahya Finance Correspondent


PROPERTY cooling measures of recent years are helping to rein in housing prices and household debt, but it is too soon to ease restrictions, a top official says.

Monetary Authority of Singapore (MAS) managing director Ravi Menon, speaking at the release of the MAS annual report yesterday, noted that housing prices have moderated but that risk factors are largely unchanged.

"Property prices remain at elevated levels... Prices have gone up 60 per cent in the past four years, and they've declined just 3.3 per cent in the past three quarters," he noted. "Global interest rates are still extremely low, and if you relax property measures in the current, very easy liquidity environment, it might set off another spiral of price increases."

Also, high-debt households are still cleaning up their finances and need time to pay off their loans.

Still, he said, property cooling measures have helped strengthen overall household balance sheets.

First, household debt growth has moderated. In the third quarter of 2011, for example, households took on 13 per cent more debt than they did in the same quarter of 2010. But in the first three months of this year, debt grew just 5.5 per cent.

Second, new housing loan borrowers are better placed to repay loans. Almost all new housing loans granted since the introduction of the total debt servicing ratio - designed to stop borrowers from overextending themselves - were within the 60 per cent limit.

The moderation in property prices, along with a fall in car prices, has seen MAS narrow its forecast range for headline inflation to 1.5 per cent to 2 per cent, from 1.5 per cent to 2.5 per cent before.

This comes amid a somewhat brighter economic outlook, with growth set for a modest pickup in the second half, Mr Menon said.

The economy is on track to grow 2 per cent to 4 per cent this year, with both major engines of world growth, the United States and China, holding up, he said.

Sectors relying on regional demand, including some financial services, business services and chemicals, should do well, he added. And those looking to the home market should stay resilient.

But the likes of electronic production will keep seeing slower growth as economic restructuring forces firms to face a new reality of higher labour costs, he said.

"What is happening now is the 'servicisation' of manufacturing, where production is shifted offshore but control centres continue to be located here."

Looking at the Middle East, Ukraine and Thailand, CIMB economist Song Seng Wun noted that external risks remain.

Even so, Singapore has fared well as a financial centre. Financial and insurance services grew 10.8 per cent last year.

MAS, which manages Singapore's foreign reserves, reversed a $10.6 billion loss to post an overall profit of $15.8 billion for the financial year. Stripping away the effect of currency translation, it made foreign investment gains of $10.6 billion, up slightly from $9.4 billion previously.

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http://www.businesstimes.com.sg/arch...s-mas-20140725

Published July 25, 2014

MAS ANNUAL REPORT

Too early to ease property cooling measures: MAS

Risk factors have not changed, property prices still at elevated levels

By Siow Li Sen

[email protected] @SiowLiSenBT


[SINGAPORE] The Monetary Authority of Singapore said it is too early to ease property cooling measures as prices remain high.

Risk factors have not changed, MAS managing director Ravi Menon said at the MAS annual report 2013/2014 press conference yesterday.

Property prices remain at elevated levels although they have started to soften, he said.

Prices went up 60 per cent over the last four years but have declined by just 3.3 per cent over the last three quarters, he said.

Global interest rates are still at historical lows, and "if you relax property measures in the current easy environment, you may set off another spiral of price increase," he said.

The level of debt among highly leveraged households remains high, though the growth of debt has moderated, he said.

For these highly leveraged households, reducing the level of debt will take time and they need to work with their banks and commit to debt repayment plans, he said.

"On the whole, MAS's view is that it's premature to ease property cooling measures now."

Mr Menon's comments come amid increasing calls by developers and other parties urging the authorities to start rolling back cooling measures such as the additional buyer's stamp duty and the seller's stamp duty.

Early this month, the National Development Ministry responded by saying it was still too early to roll back property cooling measures. It said that although home sales have decreased, prices have remained relatively stable.

Yesterday, Mr Menon said that it is important to secure gains in stabilising the market and restoring financial prudence.

The number of over-leveraged households to property purchases remain broadly similar to last year - 5-10 per cent, he said. Over-leveraging is seen when total debt servicing payments exceed 60 per cent of monthly income.

"It's stopped getting worse," but people take time, "a couple of years" to adjust and reschedule their debt repayments.

That's why it's important to be pro-active in cooling the market, Mr Menon said.

The property cooling measures have helped to strengthen overall household balance sheets in two ways, he said.

First, they have tempered the growth of household debt. Year-on-year growth of household debt has moderated from nearly 13 per cent in the third quarter of 2011 to 5.5 per cent in the first quarter of this year.

Second, the risk profile of new housing loan borrowers has improved.

Almost all new housing loans granted since the introduction of total debt servicing ratio or TDSR, were within 60 per cent threshold.

Mr Menon also said that there's no timeline or target on when the government might decide to relax some of the measures.

A sharp reduction in property prices will impact the economy. He said that the MAS does not want to see a collapse in the property market, it's not good for the economy.

Banks here are resilient to property market shocks, he said.

Stress tests of our banks during last year's Financial Sector Assessment Programme by the International Monetary Fund showed they were resilient against various stress scenarios.

These stresses included a combination of domestic interest rates increasing by more than 200 basis points; the unemployment rate rising above 10 per cent; cumulative decline in equity prices up to 70 per cent over three years; and cumulative decline in residential property prices up to 50 per cent over three years.

MAS's own stress test this year - assuming more disorderly unwinding of quantitative easing in the US and higher levels of US dollar funding squeeze - shows similar results, he said.

Latest data show a big jump in private home purchase in Q2 over Q1. DTZ's analysis of URA Realis caveats data showed a 37.1 per cent quarter-on-quarter increase in the total number of private homes transacted to 3,369 units in Q2.

Despite the recovery in Q2, the 5,826 total private homes sold in the first-half of this year is less than half the 13,651 units transacted in the first-half of last year - reflecting the dent on transactions created by the TDSR framework since its introduction in late-June 2013, noted Lee Lay Keng, regional head (SEA), research at DTZ.

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http://www.straitstimes.com/archive/...s-mnd-20140701

Too early to relax property cooling measures, says MND

Published on Jul 1, 2014 1:06 AM

By Cheryl Ong


IT IS still too early to roll back property cooling measures, according to the Ministry of National Development (MND) yesterday.

It said that although home sales have decreased, prices have remained relatively stable.

The moves to rein in property prices included extra stamp duties to curb speculative buying and the total debt servicing ratio framework which was introduced a year ago.

MND noted that private home prices had surged 60 per cent during the most recent market upswing that began in mid-2009.

"It is still too early to relax the property market cooling measures," said a spokesman. "If the measures are removed prematurely, we could see a sharp increase in demand and housing prices."

He said the objective was to "ensure a stable and sustainable property market".

Deputy Prime Minister Tharman Shanmugaratnam noted in his Budget speech in February that given the run-up in prices in the last four years, it is too early to start relaxing our measures.

The MND's comments came as prominent developer Kwek Leng Beng warned of a potential impact on Singapore's reputation as a global city, and called for a review of the policy measures.

The National University of Singapore's Residential Price Index out yesterday showed that prices of resale homes climbed 0.8 per cent in May from April, after falling for nine months. The Urban Redevelopment Authority's flash estimates for private home prices will be out today.

Ms Christine Li, research head of property agency OrangeTee, said the Government would still adopt a cautious stance because interest rates remain low, adding that Singaporeans are still looking to invest in property.

"Four years ago, mass market units were about $700 to $800 per sq ft (psf). Now, the more attractively priced units are already nearing $1,000 psf," said Ms Li. "I think upgraders from Housing Board flats in particular will still prefer a steeper price correction."

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