Singapore's Deputy Prime Minister and Finance Minister Heng Swee Keat warned that low interest rates can lead to distortions in asset prices, amid speculation that the Government may take fresh steps to cool the housing market.

"Interest rates today are ultra-low, and in some cases even negative, so this can lead to a significant mispricing of asset prices and a significant risk of investing in the wrong places," Mr Heng said in an interview with Bloomberg Television yesterday.

"When individuals commit to buying a property, they are making a big part of their life savings in it and we want to make sure that it is something that's sustainable," he said, a day after delivering the Budget speech.

Singapore's residential property market has made a rapid recovery, fuelling speculation that the authorities could impose cooling measures for the first time since July 2018. Government ministers, including Mr Heng, have warned that they do not want the market to run ahead of economic fundamentals.

When asked if it is too early to ease the current property curbs, Mr Heng said: "It is certainly premature, and in fact I should say that we have to watch this."

The last round of measures - higher stamp duties and tighter home loan limits - were imposed after prices spiked 9.1 per cent in the preceding 12 months. For 2020, prices grew 2.2 per cent.

Mr Heng declined to say what price threshold the Government might have for any additional steps. "We are monitoring this," he said.

Since the Asian and global financial crises, "we have developed a fairly good risk dashboard for the whole economy," said Mr Heng. "Different agencies are monitoring different aspects of the risk board so that if there's a need for us to move pre-emptively, we will."

He also said Singapore's further reliance on past reserves for funding its Budget will depend on how long it takes to get the global coronavirus pandemic under control.

After announcing plans to tap the reserves for a second straight year, any decision to actually use them "depends on the trajectory of the pandemic, which will then shape the trajectory of the global recovery", he said.

BLOOMBERG