Adopting a more belligerent stand to prevent the formation of asset bubbles, regulators and Asian central banks initiates to control the property price increases.
Last month, South Korea and Singapore have already started to tighten the governing rules of loans to the property sector. Soon, the country may follow suit, the Indian media reported. Hong Kong and China have also cautioned banks to shun irresponsible lending to home buyers.
“This is a positive, albeit tentative, sign that Asia has learnt from the experience of the west,” said Nomura’s chief Asia economist Rob Subbaraman. “It is prudent to lean against the formation of asset price bubbles.”
In the recent months, property prices in some countries in Asia, particularly in Singapore and Hong Kong, have sharply risen. The increase in prices has sparked concern that the unsustainable speculation in the asset markets has been more stimulated by record low interest rates.
In tackling the growing property prices, authorities seem to have drawn on lessons from the disastrous collapse of housing market in the United States as well as from other countries.
The theory of monetary policy, which Alan Greenspan championed during his tenure as US Federal Reserve Chairman, has been primarily blamed for the property meltdown in the west. The policy will actually seek to clear out the bubbles after it has already burst instead to prevent its formation.
Regulators and Asian central banks, unlike its western counterparts, have initiated throughout the past decade to rein the tentative flows into certain sectors, particularly the property sector.
However, the current efforts are especially important due to prevalent concern that over the past year, emergency interest rate that has been reduced and the unparalleled liquidity that was introduced into the global financial system could have established the stage for the inflation of asset prices.
“We believe property price inflation is the Bank of Korea’s main policy worry,” Chief Asia economist of ING Tim Condon said.