Mingze Wu | Oct 01, 2013 01:50AM ET
Latest numbers about Singapore Housing Market is in- Q3 Private Home Prices grew 0.4% Q/Q but HDB (public housing) resale prices shrank 0.7% during the same period. So is Singapore housing market cooling or is inflation risk continuing to roar?
As most of the Singapore citizenry resides in public housing projects, a slight fall in HDB prices is actually good news as it alleviate the cost of living and allow for a slightly better debt/income ratios. On the other hand, the increase in private home prices suggest that economy in Singapore continues to be strong. As a large part of private properties ownership belongs to non citizens, the increase in prices can also be seen as a sign that foreign investments (FI) are continuing to pour into Singapore’s economy – a unique case compared to other Emerging Markets where money is actually flowing out.
Hence, it is not surprising to see USD/SGD pushing lower as SGD strengthened from the news. With the October monetary policy announcement coming up in 2 weeks time, MAS may be able to use this opportunity to drive SGD higher in order to limit inflow of FI into Singapore and prevent further inflation. Furthermore, SGD has been depreciating heavily and it has been rumored that we may be already trading near the top end of MAS SGD Nominal Effective Exchange Rate, where MAS has mentioned 6 months ago that their preference is for a slightly appreciative NEER curve. With FI continuing to pump in despite recent cooling measures, MAS may need to steepen the NEER slope in order to make it less attractive for foreigners to inject their funds into Singapore.
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