Restoring household debt sustainability before cooling easing

Singapore started its cooling measures earlier than Malaysia. Of course it’s also because their property prices went up too fast for comfort. Every few months, there would be some news about the potential for the relaxation of these cooling measures. It does not seem to be happening anytime soon. As per the Monetary Authority of Singapore (MAS), “There is still some way to go, to entrench the gains in stabilising the property market and restoring household debt sustainability.” This was said by MAS Managing Director Ravi Menon at the central bank’s annual report briefing on Monday (25 July).

Some good news include the fact that household balance sheets have started to strengthen. In fact the annual growth in household debt moderated to just 1.7 percent in Q1 2016, down from around 8.0 percent in the past five years. Prices in the property market has also stabilised and moderating from their peak in Q3 2013. (Timeline looks familiar to us, right?) Anyway, on an overall basis, the prices have only adjusted by a cumulative of 9.4 percent while the growth between 2009 and 2013 was 60 percent! Menon did not mention if they would like the prices to keep moderating but he said that nominal incomes rose by only 30 percent during the same period. Hmm….

I think we should appreciate the fact the central banks of both Singapore and Malaysia do take pro-active measures and the likelihood of a mortgage crisis like the one in the US is unlikely to start here. However this also meant that the property market is likely to be quiet for a while more unless all the investors from overseas start to look at Singapore again. It is after all the most international property market here in South East Asia. As for Malaysia, I do think that the prices for the cheaper secondary homes which has not appreciated as fast as the primary ones would be worth a more serious look. My Facebook friend commented this about Malaysia’s property market. “long winter?” I think my answer to her would be, “most probably.” Happy following.

written on 29 July 2016

Next suggested article:  Singapore’s future growth potential depends on local SMEs

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