MAS warns of a Singapore housing bubble

"Eventual correction could be painful to borrowers and destabilise the economy".

The sound of alarm came as Singapore's central bank, the Monetary Authority of Singapore (MAS) announced a new round of measures meant to subdue rising housing prices, including capping loan tenure at 35 years.

MAS said that while recent government measures such as the Additional Buyer's Stamp Duty "have had a moderating effect on residential property prices" and that "there is also significant supply of housing that will come onto the market over the next two years," the demand for housing is simply not slowing down.

"Prices in both the HDB resale market and private residential property have continued to rise in Q2 and Q3 of 2012," MAS noted, which it blamed squarely on the current climate of low interest rates, globally and in Singapore.

MAS said the prevailing and problematic low interest rates are "likely to persist for some time."

"It will continue to spur demand in the residential property market, pushing up prices beyond sustainable levels," it said, which could lead to a bubble burst that will pummel Singapore borrowers and the economy.