The Monetary Authority of Singapore (MAS) has cautioned developers, lenders, and buyers against over-exuberance in the real estate market. Especially with the recent increased momentum in land, collective and private property sales.
Supply of private housing double in 2 years
The main concern raised in the MAS Financial Stability Review was the mismatch between supply and demand for private housing stemming from the development of collective sale sites. Land plots sold in private en bloc sales and the Government Land Sales (GLS) programme will potentially yield 20,000 new residential units within the next couple of years.
Population growth has slowed and there are uncertainties regarding market absorption of over 30,000 vacant units. Insufficient demand would, in turn, affect home sales and rental prices in the medium term.
Housing loans and banking system remains strong
Property analysts are less concerned about rising land and home prices as they are about the rate of increase. The real issues will come should the rate of increase destabilise the real estate and financial markets. The government is keeping a keen eye on how the market is reacting this year to previous years’ muted conditions and is merely taking a preemptive step by moderating market expectations.
Interest rates are expected to rise and while that could happen soon, Singapore’s banking system is still able to withstand a 50% drop in property prices. And as long as the asset quality of housing loans continues to be strong, the market will be safe for awhile.