Nov 23, 2010
Singapore will not turn to capital controls but is ready to take additional measures to ensure sustainable asset markets and financial stability amid an increase in capital inflows to the region for higher returns, said Finance Minister Mr Tharman Shanmugaratnam.

Capital inflows to the city-state were “intermediated efficiently” through the domestic financial markets and banking system, said Mr. Tharman in Parliament, adding that the effect on asset prices had been controlled by current policy tools.

“We are not contemplating introducing capital controls, but will continue to rely on a range of policy tools to ensure that capital inflows do not threaten its financial stability or cause a property market bubble,” said Mr. Tharman, in response to questions by lawmakers on the effect of the US$600 billion “quantitative easing” plan of the US Federal Reserve on asset prices and inflation in Singapore.

Asian home prices have climbed in recent months, driven by ultra-low interest rates and fast economic recovery in the region.

On August 30, Singapore announced restrictions to cool the residential market, including the extension of a stamp duty on those selling property within three years of acquisition and a reduction in the amount that can be borrowed by those with existing mortgages looking to buy second properties.

The measures had some “calming effect” on the real estate market, and the government would take further necessary steps while monitoring the situation closely, said Mr. Tharman.

In October, Singapore extended the trading band for the Singapore dollar for the first time since the September 11 attacks in the US, highlighting the depth of its concern on volatility in the worldwide financial markets.

The government also said inflation was likely to speed up over the next few months, reaching 4 percent at the end of the year, considering Singapore’s tightening labour market and the number of global weather-related supply disruptions.

However, the full year inflation this year would stay in the official range of 2.5 percent to 3.0 percent and 2 percent to 3 percent next year, said Mr S. Iswaran, Senior Minister of State, Ministry of Trade and Industry.

Info courtesy: Propertyguru