The central bank’s head thinks it will take at least two to three quarters to fully understand the implications of the latest property cooling measures.
After the government imposed a “decisive set of measures” on 6 July, the Monetary Authority of Singapore (MAS) is keeping a close watch on the private residential sector.
“The property market always warrants close watching, whichever direction it is inching towards,” said the central bank’s managing director Ravi Menon in a recent interview with Bloomberg.
“It’s too early to tell what the implications from the last round of tightening measures are. It will take at least two to three quarters for the full implications to be understood. So we are watching that closely.”
He said it was not sustainable that private home prices were increasing significantly amid rising interest rates and slowing growth in the country’s gross domestic product (GDP).
According to data from the Urban Redevelopment Authority, private home prices in the city-state rose by 3.9 percent quarter-on-quarter in Q1 2018, or the highest quarterly price gain since Q2 2010. The growth then decreased slightly to 3.4 percent in the second quarter.
Moreover, Singapore was ranked as the world’s sixth most expensive city in Bloomberg’s annual global city housing affordability index.
“The property market, before we implemented the cooling measures, was pretty hot. This was a wrong time to see a renewed property bubble. Not that there was a bubble, but we wanted to pre-empt that,” noted Menon.
But after the new curbs took effect, the latest flash estimates released earlier this month showed that quarterly growth in private home prices significantly slowed down to 0.5 percent in Q3 2018, or the slowest pace in five quarters.
At the same time, en bloc sales of private residential projects plunged by 90.71 percent to $353 million in the third quarter compared to $3.8 billion in the quarter before.
The new cooling measures “were taken at a time when we already knew about the risks facing the economy. We also knew and expected that growth was going to moderate gently into the second half of this year. So all those were taken into account,” Menon added.