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Asia at risk of asset bubbles:Fosler

Posted on 12 Sep 2009 | Comments Off

THE president of a prominent US research group has joined the growing ranks of economists warning against escalating asset prices in Asia.

The huge fiscal stimulus packages and flush liquidity set ‘the stage for asset bubbles to move out of the United States and into Asia’, said The Conference Board’s Gail Fosler at the CapitaLand International Forum yesterday.

Asia needs to keep a close eye on this risk, she emphasised. ‘Valuations at which acquisitions are made, at which underlying business investments are made, these acquisition prices are going to be almost generically extremely high, and I think this is going to pose a significant business challenge.’

Several economists have cautioned against potential speculation in the region’s equity, real estate and commodity markets after governments turned to fiscal stimulus and looser monetary policy to counter the downturn. Bank of China’s vice-president Zhu Min also said this week that liquidity could be heating up these markets.

Observers are training their attention on China, where property prices have risen rapidly on the back of record lending and growing optimism. Home prices in the country’s 70 biggest cities went up one per cent year-on-year in July, and again by 2 per cent year-on-year last month. Continue reading →

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Posted in Property Market / Real Estate

Tagged Singapore Property Market, Singapore Real Estate

Averting property bubbles: lessons to heed

Posted on 8 Sep 2009 | Comments Off

WHILE it is appropriate for the government to continue monitoring the situation in the property market, the question is whether pre-emptive measures should be taken sooner rather than later to prevent a bubble from forming. It is instructive to consider the actions of the Reserve Bank of Australia (RBA), which has largely managed to keep the
country out of a recession.

Prior to the sub-prime crisis, central banks in several countries (notably the US and the UK) had helped to pump up property bubbles with low interest rates which were accompanied by easy mortgage terms. By contrast, the RBA resisted cutting rates and chose instead to talk down the property market. As far back as 2002, the RBA, feeling that property prices were escalating dangerously, decided to commission housing market reports to show that prices were unsustainable. Looking at affordability, bank lending standards and collating data on home loans as well as errant marketing ploys, the RBA went on the offensive with its then governor Ian Macfarlane saying: ‘I’m using a certain amount of moral suasion to try and get . . . to investors, to make them sit back and think again.’ Interestingly, his comment mirrors that of Singapore’s National Development Minister Mah Bow Tan, who said last week that home buyers ‘need to think carefully, think long term, think about the unexpected’. Continue reading →