Increasing rates in the US should be seen within the context of a robust economic recovery there, which would add some momentum to Singapore’s own rebound.
The Singapore government cautions home buyers to carefully think about acquiring properties as interest rates grow in tandem with those in the US, which could potentially increase their debt servicing costs, reported Bloomberg.
“The risk of rising interest rates is a reminder that everyone should continue to exercise caution in their property purchase decisions,” said Monetary Authority of Singapore Chairman and Senior Minister Tharman Shanmugaratnam as quoted by Bloomberg.
His statement was made in response to a parliamentary question on the impact of rapidly increasing US long-term rates on Singapore.
Tharman noted that increasing rates in the US should be seen within the context of a robust economic recovery there, which would add some momentum to the city-state’s own rebound.
Singapore’s economy is forecasted to grow by 4% to 6% this year, following a 5.4% contraction in 2020 due to the COVID-19 pandemic.
And while he expects most buyers would still be able to continue servicing their housing loans, a small segment of households in the private property market may face cash flow difficulties.
Based on MAS analysis, the median household’s Mortgage Servicing Ratio (MSR) will continue to be manageable even under a stress scenario of a 10% drop in income and a 2.5% hike in mortgage rates.
“Buyers should assume that interest rates will rise, and be sure of their ability to service their loans before making long-term financial commitments,” said Tharman.
His warning comes after Singapore’s residential property market witnessed a rapid rebound after the circuit breaker.
In Q1 2021, Singapore posted a 2.9% hike in private property prices, according to the latest flash estimates from URA. This is the highest price increase since Q2 2018, adding to speculation that the government will roll out another round of cooling measures to calm the market. The city-state last introduced cooling measures in July 2018.
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Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this story, email: firstname.lastname@example.org