MAS Director Ravi Menon: Property cooling measures have done their job

SINGAPORE — The head of the Monetary Authority of Singapore on Saturday (May 24) said the property cooling measures in place over the past few years were introduced in a “highly unusual situation”, and are unlikely to stay in place when more normal conditions return.

The moves, which MAS Managing Director Ravi Menon described as “macroprudential measures”, have largely succeeded in keeping prices stable and moderating risk-taking.

Speaking at the Asian Monetary Policy Forum on Saturday, Mr Menon said: “Asian economies have deployed macroprudential policies to deal with financial imbalances, to a greater extent than other economies. So far, the results have not been bad. They have largely tempered the credit cycle and the pace of asset price increases, while generally maintaining price and output stability.”

With the possibility of a property bubble building, and with the need to prevent the financial instability witnessed in the global financial crisis of 2008-9, the onus was on financial policy-makers to apply specific measures to this sector – “targeting the cracks” where specific vulnerabilities are concentrated, he said.

“Financial vulnerabilities are not evenly spread across the economy. They tend to be concentrated in specific sectors and segments, such as in real estate. So, even when monetary policy has configured overall liquidity and risk-taking settings appropriately, specific pockets of financial market vulnerabilities – such as a property bubble – could remain,” said Mr Menon, who also chairs the Financial Stability Board Steering Committee.

To address these vulnerabilities, some absolute prudential limits had to be sent for buyers, sellers and banks, he said, citing the recent limits imposted on property loans: A 35-year loan tenure cap; total debt-service ratio of 60 per cent; tiered loan-to-value ratios for first and subsequent properties; and 35 per cent cap on banks’ property-related exposures.

Another item in Singapore’s “macroprudential toolkit”: Stamp duties for both buyers (ranging from 3 to 18 per cent) and sellers (4 to 16 per cent).


Ultimately, Mr Menon stressed that the measures are interim moves fuelled by unique circumstances, and are unlikely to stay in place once the global and local economy stabilise.

“We should also bear in mind that the current situation is highly unusual. We must not fall into the trap of believing that the innovative policy measures being taken now in response to these unusual conditions represent the basis for a new paradigm in the future,” he said.

“I suspect that when the dust has settled and more normal conditions return, monetary policy regimes will not look drastically different from pre-Crisis days.”

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