The recovery in the property market is welcome, but it should not “decouple from economic fundamentals”, says Ravi Menon, managing director of the Monetary Authority of Singapore (MAS).

He says that if property prices were to rise too rapidly, they will outpace the growth in income. As such, households will have to take on more leverage than they are able to manage, and this risk will be compounded as interest rates rise over time. He was speaking at the MAS Annual Report press conference on Wednesday.

“A rapid increase in prices also raises the risk of a destabilising market correction later when additional supply comes on-stream,” says Mr Menon.

He notes that prices of private housing have risen 9.1% since the trough in 2Q2017. This has mostly offset the cumulative price decline of 11.6% that was witnessed between mid-2013 and mid-2017.

The number of property transactions over the last 12 months was around 25% higher than during the previous corresponding period. Also, new housing loans over the same period have risen by 34% year-on-year, Mr Menon says.

Eugene Lim, key executive officer at ERA Realty, notes that the Government’s “key concern is the scale and pace of property price increase vis a vis economic and income growth”. He adds: “We are reminded that the Government stands ready to make policy and regulatory changes in order to ensure a sustainable property market over the longer term.”