Moves to cool property market worked: Mah

Source : Business Times – 24 Nov 2009

Too early to decide whether to restore two loan schemes

Measures introduced by the government in September to cool the property market have had an effect, National Development Minister Mah Bow Tan told Parliament yesterday.

But more time is needed to gauge the impact of the moves and it is premature to decide whether the interest absorption scheme (IAS) and interest-only housing loans (IOL) should be resumed, he said.

After months of rising property prices and swelling sales, the government announced on Sept 14 several measures to rein in sentiment. It scrapped the IAS and IOL with immediate effect, and said it would resume Confirmed List land sales for the first half of 2010.

‘These measures appear to have had some effect in tempering the exuberance in the private housing market,’ Mr Mah said yesterday, citing numbers on new private home sales.

According to the Urban Redevelopment Authority, developers sold 811 units in October, down 29 per cent from 1,143 the month before. And September’s volume was itself 37 per cent less than the 1,805 units sold in August.

The government aims to curb erratic price hikes arising from excessive speculation, inaccurate information or market manipulation, Mr Mah said. But ultimately, prices have to be determined by market forces, based on genuine demand from home buyers and investors.

‘The government will continue to monitor the property market closely and assess the market’s response to the measures introduced before deciding whether further measures are necessary,’ he said.

On the IAS and IOL, Mr Mah also said the government needs time to gauge the impact of their removal. ‘I won’t say that we will never restore these schemes, but I think it is a bit too early to make a call,’ he said.

The government has lifted anti-speculation measures in the past after the property market stabilised, he added.

Market watchers told BT yesterday it is not yet time to bring back the IAS and IOL. Chesterton Suntec International research and consultancy director Colin Tan cited a caution issued by the Monetary Authority of Singapore two weeks ago.

MAS said in its yearly Financial Stability Review that property buyers and speculators could face capital losses should growth turn out to be weaker than expected.

‘Conversely, if the recovery stays on course, interest rates will eventually rise and drive up financing costs, with severe implications for those who have over-extended themselves,’ MAS said.