Thursday 26 December 2013

Housing bubble must be kept in check: Khaw

By Rachel Au-Yong, The Straits Times, 24 Dec 2013

IT IS important to prevent the housing bubble from getting out of hand, National Development Minister Khaw Boon Wan said in a Facebook post yesterday.

So despite the unhappiness which declining prices could lead to, cooling measures are needed, he added.

"We cannot eliminate (the) property cycle but we can try to keep bubbles less bubbly.

"This means taking away the punch bowl when the party is getting hot, much to the unhappiness of sellers and developers. But this is the right thing to do."

Sharing a link to a New York Times article on the housing slump in Ireland, where home prices have halved since its peak in 2007, he said "the bubble and its inevitable bust bring huge misery to many".

Analysts said the post is most likely a response to home owners, who may be worried that their assets' value will be eroded.

Cooling measures, including a lower mortgage servicing ratio, have brought the median cash-over-valuation to the lowest in five years. It fell to $8,000 last month ahead of forecasts that it would reach $10,000 by the year end.

SLP International research head Nicholas Mak said public housing should be safe, with the risk of a housing bubble low.

"In 2010, demand far outpaced supply. That's why the Government ramped up supply then," he said. "The demand is still here... but the next thing is for HDB to engineer a soft landing where supply is just enough to meet demand in 2014."

Mr Khaw announced earlier this month that the Housing Board will start to taper supply next year, with experts believing it will dip from the current 25,000 units a year to about 20,000.


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