Singapore, ranked Asia’s second-most expensive luxury housing market, is witnessing a surge of property prices over 60 percent since 2009, propelled by rock-bottom global interest rates and quantitative easing in developed economies. Singapore’s famously efficient government is facing a challenge that has stymied many countries before: safely guiding its toppish property market to a soft landing as interest rates rise.
But the prospect of rising interest rates as the US Federal Reserve begins tapering its asset purchases has spurred fears that Singapore’s property market could be headed for a crash as higher mortgage payments could spur forced selling and defaults.
This week, Singapore indicated the specter of forced selling remains a serious concern, with the central bank, the Monetary Authority of Singapore (MAS), relaxing one of its cooling measures, the Total Debt Servicing Ratio, or TDSR. The measure aimed to ensure that buyers` monthly payments do not exceed 60 percent of their income, so they wouldn`t be caught out by a spike in interest rates. Most mortgages in Singapore have adjustable, rather than fixed, rates.
However, Michael Zink, who heads Citigroup’s operations in Southeast Asia, said in an interview in Singapore on Feb. 20. “Ninety percent of households live in a home that they own, so where’s the bubble?” Zink added that Singapore’s housing market is unique because the majority of citizens live in government-built homes, where many families have already paid off their mortgages. About 82 percent of Singaporeans live in these so-called Housing & Development Board apartments, according to the housing authority’s website.
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