MAS shuts the door on an easing of property cooling measures in 2016

Premature easing may lead to a spike in prices.

Property cooling measures will not be taking a cue from Singapore’s car financing limits, as MAS managing director Ravi Menon emphasized the looming risk of a renewed swell of property prices.

In the Monetary Authority of Singapore’s Annual Report 2015/16, Menon announced that it would be premature to lift the property cooling measures.

“MAS eased the limits on car financing in May this year. But it is not time yet to ease the property cooling measures. The considerations and circumstances in the two markets are quite different,” Menon asserted.

“Property prices have thus far adjusted only modestly after a strong run-up that exceeded income growth. Prices have moderated by a cumulative 9.4% from their peak in the third quarter of 2013. But they had gone up by 60% between 2009 and 2013 when nominal incomes had increased by only 30% during the same period,” noted Menon.

He added that there remains a risk of a renewed surge in property prices, given that interest rates are likely to stay low and global investors continue to prowl for yield.

In addition, while the growth in household debt has eased considerably, it will take time for household balance sheets to strengthen and become more resilient to interest rate as well as income shocks.