MAS warns of 'excessive exuberance' in property market
MAS urges developers, lenders and prospective home buyers to act with caution
There is "excessive exuberance" in the property market as well as risks from rising land prices and a possible oversupply of housing stock.
The stark warning yesterday came from the Monetary Authority of Singapore (MAS), which urged developers, lenders and prospective home buyers to act with caution.
Its concerns stemmed mainly from a potential mismatch between the supply of private housing and occupation demand, given that the development of collective sale plots and Government Land Sales (GLS) sites could add another 20,000 new units in the next one to two years.
This will more than double the current supply in the pipeline, assuming the inventory of about 17,000 units with planning approvals remains unsold.
The MAS noted that there is "considerable uncertainty" whether existing vacancies of over 30,000 homes and the new supply can be fully absorbed by the market, especially when slower population growth is factored in. If demand is insufficient, there could be pressure on prices and rentals in the medium term, it warned.
MAS deputy managing director Ong Chong Tee noted that near-term financial stability risks may have receded with the stronger global economy but financial institutions, households and corporates should pay heed to the issues flagged in the MAS Financial Stability Review released yesterday.
These include "the impact of rising interest rates, geopolitical developments and excessive exuberance in the property market", he added.
The MAS warning echoes similar comments from the Ministry of National Development recently. Market watchers see these reminders as attempts to prevent prices from running up too quickly on the back of developers' keen bidding for land.
Savills Singapore research head Alan Cheong said: "There is nothing wrong with rising land or property prices. The issue is whether the rate of increase will destabilise the real estate and financial markets."
DBS senior economist Irvin Seah sees such reminders as "moral suasion" from the Government: "While strong economic growth this year has also added confidence to home buying, the property market is driven by expectations, and this is why the Government is trying to moderate expectations."