Singapore property stabilizing, cooling measures stay for now: finance minister

Credit: Reuters/Yuri Gripas

IMFC Chairman Tharman Shanmugaratnam speaks at a news conference during the Spring Meeting of the IMF and World Bank in Washington, April 20, 2013.

Singapore, along with many other countries, has been concerned about the effect of low global interest rates and high levels of liquidity on its asset markets, especially the property sector.

In a series of cooling measures since 2010, the government has aimed at 'preventing a full-scale bubble from being formed because that can only crash but at the same time not overreacting in one set of moves,' Tharman, who is also chairman of the central bank and a deputy prime minister, told Reuters.

'Our intention is to stabilize the market, if possible have some softening of prices,' he said in an interview.

'Longer term, our intention is to try as best as we can, although it's difficult, to have prices not run away from incomes.'

Home prices in the wealthy city-state rose for a fifth straight quarter in the three months to June. Analysts said owners and developers of private apartments in the outer suburbs appear most at risk if the market corrects.

In the latest move, the central bank recently introduced rules to ensure a buyer's monthly payments do not exceed 60 percent of income, a move designed to ensure investors are not caught out by a rise in interest rates.

'The market as a whole is seeing some stabilization,' Tharman said. 'We're not ready yet to lift our measures or ease up on our measures so we're watching the market and have to make judgments without announcing our policy moves well in advance.'

A slowdown in property price appreciation was 'more than temporary' and was a 'response to our measures', he said.

Singapore, which aspires to be a global city and an oasis for the ultra-wealthy, does not want to dissuade the rich from investing in property but steps such as higher stamp duties for foreign buyers were designed as a disincentive, he said.

'It's not a closed-door policy because Singapore has to remain an open market,' he said. 'But we've put some sand in the wheels, a fair bit of sand in the wheels, and it's having some effect at the top end.'

Tharman said the buying of property by rich foreigners was part of a hunt for returns, not a backdoor way of hiding 'grey money' from authorities at home.

'Most of the demand for property in Singapore has been a search for yield rather than a search for a place to keep ill-gotten money,' he said. 'They've got enough islands in the world to keep their money stashed away.'

The affordability of housing and the overall cost of living are major concerns among Singaporeans, who are also angry about the number of foreign workers in the small country of 5.3 million people.

The long-ruling government, hit by voter discontent in the 2011 election and in a by-election this year, has moved to slow immigration, improve prospects for Singaporeans and cool the property market but the concerns and anger persist.

(Reporting by John O'Callaghan, Kevin Lim and Rachel Armstrong; Editing by Kim Coghill)