Saturday, January 12, 2013

Interest rate and property prices

The Government is now introducing strong measures to cool the property market. This is the latest of many measures in recent months, and showed that the previous measures were not working. 

The underlying problem is the low interest rate in Singapore. It is convenient to blame the low interest rate globally for our problem, but there are ways to counter-act it. 

Australia has interest rate that are higher than inflation. Their economy seemed to be working well. They achieved a balance between the interest of retirees, who depend on interest rate to give them a decent return, and borrowers who buy property and shares. Perhaps, we should follow their example.

We can have another convenient excuse, that Singapore has an open economy, so we are not able to block the inflow of funds. I wonder if this is true. It may be possible for us to impose a tax on money deposited in Singapore, like was done in Switzerland.

I do not have the answers, but I think we need an open mind to explore the options.

1 comment:

Weng Mao Fa said...

Thailand central bank has a better practice to help retirees in a very low interest financial market.
i.e Government Saving Bond

- Retiree open an account with Krungthai Bank
- He/she recieves a passbook & ATM Card
- He/she apply the Gov. Saving Bond with ATM Card.
- He/she will update the passbook at ATM and received interest payment which is higher than usual bank rate.
- easy and happy

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