Premature to unwind cooling measures: Maybank Kim Eng

Chief economist sees smaller home supply in long term

[SINGAPORE] The government is not likely to be unwinding any of its property cooling measures this year, said Maybank Kim Eng head of research Ng Wee Siang.

"As long as interest rates remain where they are now, that would be too premature."

Instead, it is more probable that the government would reduce the number of private homes and HDB flats that will come onstream in the longer term, he added.

Mr Ng's comments at The Business Times-Maybank Kim Eng Invest Asia 2014 come amid a call for the government to relax some of its property cooling measures.

Director of property research firm Ascendant Assets Getty Goh said on Friday that this was necessary given "the lacklustre property market" and the likelihood that interest rates will rise this year and in 2015.

Mr Ng said: "The key concern I have is that the moment they unwind something, people will start to think whether some of the more major measures could be unwound as well. So their expectations could actually go overboard."

He noted that the Monetary Authority of Singapore has already said that the total debt servicing ratio (TDSR) framework would be a long-term measure.

The TDSR framework, the seventh cooling measure and introduced in June last year, limits a homebuyer's total debt obligations to 60 per cent of his gross monthly income

For the first six measures, it will be wiser to unwind them "only when things get really quite bad", said Mr Ng.

The brokerage firm has an underweight rating on the property sector, which it deems to be the "biggest loser" from the start of the tapering of quantitative easing (QE) in the US.

"The property sector has benefited greatly from the very low interest rate environment in the past few years," he said.

The tightening of the US monetary policy means there will not be as much liquidity as before.

The supply of private properties will also accelerate in 2015-2016, he added.

Reits, too, will suffer, because of a depreciation in their net asset value, which had been inflated by both the low-interest rate environment and "massive liquidity in the system".

The reversal of both due to the policy shift in the US "could deter very meaningful yield-enhancing acquisitions", said Mr Ng.

The start of QE tapering would have implications for the credit cycle in Asia as well, said Maybank Investment Bank chief economist Suhaimi Ilias in another presentation at the event.

"Such low cost of credit (in the past few years) has led to a surge in banking system loans, and by now the banking system loans in both Hong Kong and Singapore have reached quite high levels," he said.

"From an Asia perspective, there seems to be a threshold of banking credit to GDP, after which risk would be very high and the danger of a financial crisis is there."

This threshold is at 160-180 per cent of GDP, which some Asian countries are approaching, or have already surpassed, he warned.

Source: Business Times 13th January 2104

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Premature to unwind cooling measures: Maybank Kim Eng

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