When the 2010 Global Financial Stability report was released by the International Monetary Fund (IMF), it warned of problems in many Asian property markets. The closest it got to characterize the markets as bubbles was when they were described as overheating and "by some measures, valuations are stretched".
 |
On the contrary, the business sector has no qualms in calling a spade a spade.
Dr. Marc Faber also known as Dr. Doom did not hyphenate his words in warning that China’s economy may crash within a year.
The IMF is worried about the possible contagion effects in regional property markets.
The world body has noted that the proportion of property loans to total bank lending in Singapore was closed to 80 percent in the fourth quarter last year. This is the highest achieved for the quarter among the markets mentioned in the report.
The report indicated that some markets, especially Korea, Singapore Hong Kong and China, the price-to-rent ratios are "elevated". It warns that Asia’s booming property markets may pose risks to the financial stability and that the banks are "increasingly vulnerable" to a price correction.
But the real estate figures released lately for Q1 this year showed that in Singapore’s case, the price-to-rent ratios can be under control.
Our private property index increased moderately by 5.6 percent compared to the two preceding quarters. Unless this can be shaved down, it is still high.
The continuing increase in prices poses little risk if rentals also increase at about the same rate. For investors, a closer examination showed that there were a high number of demolitions in Q4 last year.