'Euphoria' in Singapore property market calls for caution: MAS chief Ravi Menon

Monetary Authority of Singapore managing director Ravi Menon said developers should be cautious when making their land bids, bearing in mind the supply that is coming on-stream.
Monetary Authority of Singapore managing director Ravi Menon said developers should be cautious when making their land bids, bearing in mind the supply that is coming on-stream.PHOTO: REUTERS

SINGAPORE - There is euphoria in the Singapore property market, and developers, banks and home buyers should be cautious, said Mr Ravi Menon, managing director of the Monetary Authority of Singapore (MAS).

Developers should be cautious when making their land bids, bearing in mind the supply that is coming on-stream, said Mr Menon on Wednesday (July 4). He was speaking at the MAS annual report media briefing. 

"We are also telling individuals who purchase property to be careful. Interest rates are rising, be cautious of debt-servicing burdens, avoid taking on too much leverage when buying a house," he said. "We are also telling the banks to be careful when underwriting, there is euphoria now, everything looks good." 

Banks should also stress test when underwriting now for future scenarios, said Mr Menon.

"Basically, we are sounding caution to everyone to be sober; balance and exercise good judgment," he said.

He added that the Government is closely monitoring the property market. 

"We need to be mindful of the supply and demand dynamics and we have to ask ourselves whether demand will be able to match the big supply that is coming on-stream in the next few years," said Mr Menon.

 
 
 
 

There has been aggressive bidding by developers both in collective sale tenders and government land site bids. This is expected to more than double the number of units available in the near term. If left unsold, this could result in a supply imbalance and weight on the market, he said.

The Singapore property market has also seen a resurgence in prices and transactions over the past year, said Mr Menon.

Prices of private housing have increased by 9.1 per cent since the trough in the second quarter of 2017. This has mostly offset the cumulative price decline of 11.6 per cent during the four-year period between mid-2013 and mid-2017.

The number of property transactions over the last 12 months was around 25 per cent higher than during the previous 12 months. New housing loans over the last 12 months have risen by 34 per cent year on year.

"As I said, we welcome the recovery - why would anyone want the property market to continue sliding," said Mr Menon. "(But) it needs to recover in line with economic fundamentals, not ahead of income growth."

A rapid increase in prices also raises the risk of a destabilising market correction later when additional supply comes on-stream, said the central bank chief.

MAS, the Ministry of National Development and the Ministry of Finance are closely monitoring developments in the residential property market and remain committed to ensuring a sustainable market, he added.