Up to 9,000 Singapore private property owners could be forced to sell their homes if interest rates rise in the city-state

9K units of private property could be forced sold if interest rates rise

July 24th, 2013 |  Author: Contributions

Up to 9,000 Singapore private property owners could be forced to sell their homes if interest rates rise in the city-state, according to an analyst report published today.

On the back of news that up to 10 percent of Singapore households may have already over-leveraged their private property purchases beyond the new 60 percent limit that was recently imposed by the Monetary Authority of Singapore (MAS), wealth management firm Religare Enterprises has cautioned its clients to avoid investing in Singapore property developers.In its ASEAN Property Pulse report released today, the research arm of the India-based firm explained that between 10 -15 percent of borrowers could be in financial trouble should interest rates rise in Singapore.

MAS has reported that between five to 10 percent of Singapore households could have over-extended themselves, fuelled by low interest rates and stretched loan tenures.  The majority of mortgage loans in Singapore are floating rate packages, according to the company, which means households will face higher monthly repayments when interest rates normalise.

Religare has predicted that a rise in interest rates could see more than 9,000 financially troubled properties being listed on the market – assuming a figure of 10 percent of the 90,000 private homes that are scheduled to be completed between now and 2016.

The authors of the report said: “Another worrying statistic is that only 70 percent of the loans are for owner-occupied homes, meaning investor demand in private homes is running quite high.”

Housing Development Board (HDB) properties and executive condominiums (ECs) have to be purchased for self-occupation, the company noted, so all property investment demand is in the private property sector.

“A little wobble in prices combined with higher interest rates might shake up a few property investors as well and add to the possible troubled units on the market,” the report said.

The company has advised its clients to be cautious on the Singapore residential property market and against investing in Singapore property developer shares.

“We expect prices and rents to correct over 2014-15 on the back of completion of more than 90,000 units between 2H 2013 and 2016,” it predicted.

Andrew Batt, International Group Editor of PropertyGuru, wrote this story. To contact him about this or other stories email andrew@allproperty.com.sg

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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