Almost a year after intervening to stem soaring property prices, Singapore has done what it set out to do and stabilised the property cycle, Minister for National Development Lawrence Wong said.
The property market last year, before the cooling measures were put in place, we saw prices rising very sharply, Wong said in an interview with Bloomberg Television on Thursday. There was a very real risk that prices would outpace fundamentals, and I think if that had happened then eventually it would lead to a destabilising correction and I think everybody would be worse off.
Singapore government introduced cooling measures to slow price increases in July 2018, including raising stamp duties for second homes and entities, and tightening loan-to-value limits for housing loans granted by financial institutions. Home prices fell for a second straight quarter in the three months ended March 31, with luxury home values, or the cost of residences located in prime areas, down 2.9%, the most since the quarter ended June 2009.
It was, as we had stressed then, not to bring down prices but to stabilize and moderate the cycle, and I think we have achieved that effect, Wong said. Asked if he was concerned about property buyers shifting focus from Hong Kong’s ever-upward property market to cheaper Singapore, Wong said there will always be foreign investors looking to buy because they think its a good investment. However, he said Singapore will continue to monitor prices and has a suite of available tools at its disposal to ensure stability.
We welcome investors to our property market, but what we want to ensure is that demand, regardless whether its local demand or foreign demand, does not cause the prices to move at a pace that outstrips fundamentals”
Wong said genuine home owners would understand. A speculator may not be happy, because they would like to go in when the price is low and exit when the price is high and flip. But we do not want to be a nation of property speculators. We want to be a nation of home owners.
Singapore also has sufficient liquidity in its financial system to sustain housing demand, Wong said. That is despite DBS Group Holdings Ltd., the city-states biggest bank, saying last month that the only caveat in an otherwise healthy performance was the net shrinkage in its mortgage book. Wong said Thursday that interest rates are still quite low, compared to the past.
The liquidity is still there, he said. Not to mention that over the years with growing economies and rising affluence, people have funds and they are looking to invest. So they will look for attractive assets be it in the financial markets, or in the property markets.