Since 2009, MAS has introduced a series of measures to ensure stability in the property market and to encourage financial prudence among borrowers. Private residential property prices have declined gradually. From the peak in Q3 2013, overall prices have declined by an average 0.9% each quarter over 10 consecutive quarters. Alongside the gradual moderation in prices, transaction volumes - across new sales, resales and subsales - have declined and remained subdued. The current transaction activity is less than half of that seen between 2010 and 2012. As a result, the growth in housing loan volumes has continued to moderate and the risk profile of housing loans has improved.

The average tenure of new loans has declined from 30 years in 2012 to 25 years in Q1 2016. The share of new private housing loans with loan-to-value ratios above 70% fell from 77% in Q2 2010 to below 60% in Q1 2016. The improvement in loan profile underpins the banking system's resilience to risks arising from the property market. The rise in mortgage rates remains manageable for the majority of households and does not pose significant repayment risk for banks' housing loan portfolios. Our stress test shows that the banking system would be able to withstand a stress scenario that includes a sharp correction in property prices.

The measured decline in property prices suggests a benign scenario with property prices settling at sustainable levels over time. MAS remains vigilant for signs of renewed froth in the property market on the back of still-elevated prices in certain market segments. At the same time, uncertainties in the financial markets and headwinds in the external outlook could add to risks of a sharper-than-warranted price correction. MAS will continue to monitor the property market carefully for risks to financial stability and take appropriate measures to maintain a stable and sustainable market.