The United States Federal Reserve recently announced a 0.25 per cent hike in interest rates, its first increase since 2006. Though it may affect the Singapore interbank offered rate (Sibor), property analysts are not too worried about a sudden or sharp effect on the local property market.
Photo: Aeropolis in Tangerang, Indonesia.
Though interest rates will indeed increase come 2016, the rise may not be as sharp as expected, especially since the SingDollar has been gradually weakening against the greenback. The economy in general may be more subdued as household earnings are deflected to pay of debts and loans, but the Monetary Authority of Singapore (MAS) has indicated it will take a more prudent stance in managing the local economy and inflation. As most Asian currencies are expected to weaken against the US dollar, it may be worth considering a redirection of focus to regional properties instead.
Property buyers with home loans and mortgages pegged to the Sibor may see a rise in their monthly mortgage payments, though the increase may be gradual. Analysts are expecting the Sibor to reach 2 per cent by end of next year and the more volatile Swap offer rate (SOR) may rise to 2.3 per cent. Currently the 6-month Sibor is at 1.18900 while the SOR was at 1.59358. While most buyers count on rental yields covering their property loans, the more worrisome trend for next year might be a competitive rental market as more homes reach completion and enter the market.