Government faces risks on property market:HSBC

It is still too early to tell if the steps taken by the government to help cool the property market are enough, HSBC said.

Low interest rates and capital inflows, including from the ever wealthier Asians, have left financial conditions loose, propping up property prices. Singapore's property markets may also have been the beneficiary of additional property-related investments following Hong Kong's property cooling measures last year, which may have diverted flows to Singapore instead.

Property prices in Singapore continued up move north despite the cooling measures introduced in August last year, which only to a limited extent managed to slow the rate of appreciation of property prices.

The new set of measures announced today demonstrates the government's concern about the potential for bubble trouble and their willingness to take decisive action. The set of measures introduced rightly focus on cooling demand, especially of the more speculative kind, and also on safeguarding banks and borrowers through tightened macro-prudential measures. The two types of measures will both help reduce the froth and the macro-prudential measures will also help lessen any adverse implications from rising rates and/or potential price drops by providing a larger equity cushion.

The steps announced today should have an impact and will help cool the market, but let's see if this is the end of it. It's too early to tell with interest rates low and the pre-conditions for continued strong capital inflows still in place.

The government is clearly concerned about bubble trouble down the road and the steps announced today demonstrate that they are willing to take the necessary steps to avoid it. The steps taken will certainly help cool the property market, but it is too early to tell if this is going to be enough.