Singapore may need to rein in speculation

Demand for private homes has experienced “strong growth” and unchecked price gains may expose the property market to risks in the global economy, the Monetary Authority of Singapore said in its Financial Stability Review today. There should be “close monitoring” of home prices and transactions, it said.

Singapore property stocks fell on the central bank's comments. After cutting interest rates to record lows and boosting public spending to counter the global recession, Asian countries from South Korea to Singapore are now fighting rising real-estate values, which threaten to mimic the U.S. mortgage bubble that roiled the world economy.

“Policy makers are trying to learn the lessons from the U.S. crisis,” said Robert Prior-Wandesforde, a Singapore-based senior economist at HSBC Holdings Plc. “A lot of central banks are now taking a more preemptive approach to bubbles and potential bubbles. That's quite a sensible approach.”

In Hong Kong, where a 28 percent jump in home prices this year has sparked a public outcry, Financial Secretary John Tsang said Nov. 4 the government was “very concerned” about the “sharp” rise.

“Despite the lingering uncertainties in the domestic and global economy, domestic property market activity has taken on its own dynamic,” Singapore's central bank said today. “The risk of a renewed escalation of speculative momentum cannot be discounted. The nature and timing of further measures, if deemed necessary, would have to be balanced against the still uncertain path of economic recovery.”

Singapore has barred interest-only loans for some housing projects and stopped allowing developers to absorb interest payments for apartments that are still being built.

The government is releasing more land for sale in the first half of next year as part of measures to prevent excessive price swings in the property market. Home prices rose 15.8 percent in the third quarter, the most in 28 years, after dropping 25 percent in the previous four quarters.

CapitaLand Ltd., Southeast Asia's biggest developer, dropped 1.2 percent to S$4.04 at 2:27 p.m. in Singapore today, even as the benchmark stock index rose 0.3 percent. The stock had risen 59 percent this year before today's fall. City Developments Ltd., the nation's second-biggest developer, slid 1.6 percent to S$9.86 and Wing Tai Holdings Ltd. declined 1.8 percent to S$1.63.

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