Tharman says some correction in prices will not be out of order
The Straits Times | Mar 02, 2013
Property prices in Singapore still have "some ways to go" before they reach an acceptable level relative to incomes, according to Finance Minister Tharman Shanmugaratnam.
"We're still in a wrong part of the cycle," he told Bloomberg TV in an interview on Thursday.
Mr Tharman, who is also Deputy Prime Minister, said the adjustment process would "happen through a combination of income improvement, as well as prices certainly not going up further".
"Some correction in prices will not be out of order," he added.
With seven rounds of property cooling measures implemented since 2009, as well as a significant increase in the supply of new homes, Mr Tharman is "pretty confident" that the Government will get a handle on the situation.
"We can prevent a real bubble from being formed which then eventually crashes, and that's our objective," he said.
Housing prices in Singapore have risen about 30 per cent since 2009, on the back of healthy economic growth, low interest rates and strong capital inflows.
The pace of price growth has slowed in recent years with the cooling measures, but home prices have yet to ease significantly.
In the hour-long interview, Mr Tharman also indicated that Singapore's economic growth this year "could come out at the lower end" of the Government's official forecast of 1 per cent to 3 per cent.
"The biggest issue is still what happens in the most developed economies," he said, referring to potential threats to Singapore's economic expansion. "As a highly open economy, as an economy that lives by being global and regional, that matters to us."
But he also indicated that there is no need for Singapore to relax monetary policy at this juncture, given the tight labour market.
"We don't have an output gap, and evidence of that is in an extremely tight labour market," he said. "In that context basically, you can't have an easy monetary policy, which in our case is an exchange-rate policy."
Economists expect the Monetary Authority of Singapore, of which Mr Tharman is chairman, to maintain its stance of an appreciating currency when it next reviews monetary policy next month.
Touching on foreign worker curbs, which he tightened in his annual Budget speech on Monday, Mr Tharman said the Government's key priority is to raise productivity "to a new level".
"If you don't raise productivity, it's hard to raise incomes," he said. "And if you can't raise incomes for the average person, for the median household and for those at the lower end of the wage ladder, your society frays."
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