Homepage
PR Newswire
22-01-2011, 10:49 AM
Business Times - 22 Jan 2011
Authorities must prick bubbles decisively: MAS
By SIOW LI SEN
PROPERTY bubbles can build up quickly and the authorities are resolved to tackle these risks, says Monetary Authority of Singapore (MAS) MD Heng Swee Keat.
In tackling these asset bubbles, policymakers must communicate clearly their resolve and the willingness to take progressively tougher measures where warranted, he said yesterday at the opening of EDHEC-Risk Institute Asia.
'Many parts of Asia are vulnerable to property bubbles, not only because of current liquidity conditions but also because many investors believe that in a growing economy, the property market can only move up,' said Mr Heng.
Many have forgotten how the property markets in the region slumped during the 1997/98 Asian Financial Crisis, he said..
Risks can build up rapidly and there has been debate on the types of policy tools to address potential asset bubbles.
Mr Heng said a combination of tools that addresses the different facets of the issue is needed, and they should be simple and easy to understand. 'More importantly, for these tools to be effective, the intention of the authorities has to be clearly communicated.'
'Policymakers must leave no doubt of their resolve to tackle the potential build-up of risks. This may mean, for instance, the willingness to take progressively tougher measures where the situation warrants,' he said. Last week, the authorities unleashed pretty severe measures - the third set in 12 months - to cool the property market. They included requiring cash of as much as 50 per cent to buy a property in some cases and increasing the holding period for seller's stamp duty from three years to four.
Mr Heng said the latest round of measures is not a substitute for banks' own risk assessment processes. Banks should continue to maintain prudent lending practices. 'This includes taking into account potentially higher interest rates in their credit assessments, and not assuming that current low interest rates will last indefinitely. MAS will continue to monitor banks' activities and practices closely, he said.
Authorities must prick bubbles decisively: MAS
By SIOW LI SEN
PROPERTY bubbles can build up quickly and the authorities are resolved to tackle these risks, says Monetary Authority of Singapore (MAS) MD Heng Swee Keat.
In tackling these asset bubbles, policymakers must communicate clearly their resolve and the willingness to take progressively tougher measures where warranted, he said yesterday at the opening of EDHEC-Risk Institute Asia.
'Many parts of Asia are vulnerable to property bubbles, not only because of current liquidity conditions but also because many investors believe that in a growing economy, the property market can only move up,' said Mr Heng.
Many have forgotten how the property markets in the region slumped during the 1997/98 Asian Financial Crisis, he said..
Risks can build up rapidly and there has been debate on the types of policy tools to address potential asset bubbles.
Mr Heng said a combination of tools that addresses the different facets of the issue is needed, and they should be simple and easy to understand. 'More importantly, for these tools to be effective, the intention of the authorities has to be clearly communicated.'
'Policymakers must leave no doubt of their resolve to tackle the potential build-up of risks. This may mean, for instance, the willingness to take progressively tougher measures where the situation warrants,' he said. Last week, the authorities unleashed pretty severe measures - the third set in 12 months - to cool the property market. They included requiring cash of as much as 50 per cent to buy a property in some cases and increasing the holding period for seller's stamp duty from three years to four.
Mr Heng said the latest round of measures is not a substitute for banks' own risk assessment processes. Banks should continue to maintain prudent lending practices. 'This includes taking into account potentially higher interest rates in their credit assessments, and not assuming that current low interest rates will last indefinitely. MAS will continue to monitor banks' activities and practices closely, he said.
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/