Singapore Central Bank Says Too Early to Ease Property Curbs

By Sharon Chen and Pooja Thakur

Photographer: Munshi Ahmed/Bloomberg

UOB Plaza One stands among other buildings in the central business district in Singapore.

Singapore’s central bank said it’s too early to ease property restrictions after prices in Asia’s second-most expensive housing market fell for three straight quarters.
Real estate prices “remain at elevated levels,” Ravi Menon, managing director of the Monetary Authority of Singapore, said at the release of its annual report today. “It’s very important that we secure the gains that we’ve made in stabilizing the market and restoring financial prudence.”
Singapore’s property stocks fell for the first time in eight days as the central bank signaled its determination to extend a campaign that began in 2009 and included tighter mortgage rules and extra taxes. Residential values in the island-state dropped for a third quarter in the three months through June, the longest losing streak in five years.

“This is still an initial stage of a price correction,” said Donald Han, managing director of Chesterton Singapore Pte, a real estate consulting company, adding that housing prices haven’t declined as much as sales volume. “The government will look at the pace and period of correction before deciding on relaxing measures.”
The FTSE Straits Times Real Estate index, which tracks 49 property companies, fell less than 0.1 percent at the close in Singapore, after dropping as much as 0.4 percent earlier, the first decline in eight days.

Photographer: Munshi Ahmed/Bloomberg

Ravi Menon, managing director of the Monetary Authority of Singapore.

‘Deep Pockets’

Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam, who is also chairman of the central bank, said on July 4 that a further correction in the Singapore property market would not be unexpected. Residential prices have risen 40 percent since Sept. 30, 2009 to their peak in September last year.
Debt levels among highly-leveraged households remain high, Menon said. The MAS has narrowed its 2014 inflation forecast to between 1.5 percent and 2 percent from 1.5 percent to 2.5 percent as the property curbs helped stabilize prices and rents, Menon said.
“I don’t see the government relaxing the curbs for a year,” said Nicholas Mak, an executive director at SLP International Property Consultants in Singapore. “Developers that have deep pockets may not be under tremendous pressure to cut prices.”

Further Declines

An index tracking private-residential prices retreated 1.1 percent to 209.3 points in the three months to June, following a 1.3 percent decline in the previous three months, according to preliminary data released by the Urban Redevelopment Authority on July 1.
The government began introducing the housing-market curbs in 2009, with some of the strictest measures implemented in 2013, including a cap on debt at 60 percent of a borrower’s income, higher stamp duties on home purchases and an increase in real-estate taxes.
Home prices in Singapore will probably extend declines as the government sticks with curbs, according to Keppel Land Ltd.
“Home prices are expected to continue to moderate,” Chief Executive Officer Ang Wee Gee said at a results briefing yesterday. “Singapore is unlikely to relax property-cooling measures in the short term.”