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Thread: No unwinding of property cooling measures: MAS

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    Default No unwinding of property cooling measures: MAS

    No unwinding of property cooling measures: MAS

    Jun 30, 2017

    It would send wrong signal at time when some regional regulators have made further curbs

    Yasmine Yahya
    Assistant Business Editor


    Adjustments to property cooling measures earlier this year do not signal the start of an unwinding of those measures, Monetary Authority of Singapore (MAS) managing director Ravi Menon said yesterday.

    In March, the Government cut the holding period for the Seller's Stamp Duty and lowered the rates as speculative property flipping had fallen markedly, he said at the MAS Annual Report's release.

    The Government also tweaked home loan curbs by excluding mortgage equity withdrawal loans with loan-to-value ratios of 50 per cent or less from the total debt servicing ratio framework, which limits the amount home buyers can borrow.

    That was to give home owners greater flexibility to monetise their properties for retirement needs.

    However, the remaining cooling measures - rolled out progressively since 2009 - are still necessary as underlying demand for private residential properties continues to be firm in an environment of persistently low interest rates, he said.

    Also, investors continue to search for yield and safety in property markets around the world, he noted.

    "Regional property markets have been buoyant and their respective authorities have, in the past six months, introduced further property cooling measures," he said. "Easing the measures now would send a wrong signal."

    Developers here have also been active despite the cooling measures, putting in bullish bids for recent Government Land Sales tenders, including one in Margaret Drive and another in Stirling Road.

    ANZ economist Ng Weiwen said the MAS stance did not surprise him, given that property prices have not declined much from their peak.

    "If domestic interest rates were to rise significantly, those who bought their properties in the last few years, when prices were very high, will have difficulty financing their mortgages, especially if they had taken up floating rate packages."

    The comments come as MAS caps a robust year. After contribution to the Consolidated Fund, MAS made a net profit of $24.3 billion in the financial year ended March 31.

    This is a record profit, but Mr Menon noted that MAS' profit and loss outcomes are subject to sharp swings and do not reflect its underlying investment approach, which is conservative and emphasises steady, long-term returns.

    MAS' underlying foreign investment gains have remained fairly stable at $10 billion to $12 billion on average over recent financial years.

    The financial sector saw a net increase of 2,800 jobs last year despite the slowdown in financial sector growth to 0.7 per cent from 5.3 per cent in 2015, Mr Menon said.

    Digitisation and automation are gathering pace, and many global financial institutions have been downsizing and restructuring, he noted.

    But most retrenched finance professionals have been able to find alternative employment, within the industry or in other sectors.

    MAS is working with financial institutions to identify jobs that may become threatened and to help workers at risk gain new skills.

    "Jobs and skills have moved to front and centre of the MAS' financial sector development agenda," Mr Menon said.

    "Working with our industry, we are resolved to help our workforce seize the opportunities that a thriving financial centre at the heart of a dynamic Asia presents."

  2. #2
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    Default Cooling measures stay amid risk of spillover property demand

    Cooling measures stay amid risk of spillover property demand

    MAS fears easing rules now will draw inflows from countries clamping down on runaway prices

    June 30, 2017

    Jamie Lee


    PROPERTY cooling measures remain "necessary" as there is a risk of pent-up demand spilling into Singapore if it eases rules now while other countries are tightening regulations on property investments.

    Managing director of the Monetary Authority of Singapore (MAS) Ravi Menon said on Thursday that countries including China, Hong Kong, South Korea, and New Zealand have tightened prudential requirements such as housing loan-to-value ratios and debt servicing ratios. In Australia, New South Wales will be doubling the stamp duty surcharges for foreign investors.

    "Regional property markets have been buoyant and their respective authorities have, in the past six months, introduced further property cooling measures," he told reporters at a briefing on MAS' annual report.

    "Easing the measures now would send a wrong signal."

    To be clear, the property market has substantially stabilised over the last three years, said Mr Menon.

    Private residential property prices have fallen by nearly 12 per cent over the last 14 quarters. This follows an increase of close to 60 per cent over 17 quarters. Growth in housing loans, which stood at about 20 per cent year-on-year in 2010, has moderated to 4 per cent as at the first quarter of this year, while just a negligible share of housing loans is in negative equity, said Mr Menon.

    But underlying demand for private residential property remains firm amid a continued low interest rate environment, he added, with property project launches in recent months attracting good take-up.

    "At the same time, notwithstanding rate hikes in the US, mortgage rates in Singapore remain very low. The risk of a renewed unsustainable surge in property prices is not trivial," said Mr Menon.

    While certain measures have been "calibrated" - such as in shortening the holding period for the sellers' stamp duty - that does not signal the start of an unwinding of the property cooling measures, said Mr Menon.

    Specifically, the total debt servicing ratio (TDSR) - a debt-to-income threshold - is not a cyclical tool to be adjusted periodically, he said. Under TDSR, a borrower is limited to making total monthly debt repayments of no more than 60 per cent of his or her gross monthly income.

    "Over the medium term, property prices should be aligned with broader income trends in the economy," said Mr Menon.

    The Singapore economy is forecast to grow by 1-3 per cent this year, with a strong likelihood that it would be higher than the 2 per cent registered last year. Global GDP growth is expected to come in at 3.5 per cent this year, according to IMF, up from 3.1 per cent in 2016.

    MAS also noted that global trade is recovering, alongside a more entrenched economic expansion in the US, recovery in domestic demand in the eurozone, and steady growth from China.

    "The global economy should be able to absorb the ongoing increase in US interest rates, as the rise in rates is itself a response to strengthening economic activity," said Mr Menon.

    "But vigilance is still called for - economies and markets have been accustomed to low interest rates. They could be thrown off balance if rates rose faster than expected."

    Core inflation is projected to average 1-2 per cent in 2017, up from 0.9 per cent in 2016. The rise in core inflation since the fourth quarter of 2016 has largely reflected higher prices of oil-related items, said Mr Menon, though domestic sources of inflation remain contained partly as the pass-through of business costs to consumer prices has been quite weak.

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