5 Tips To Spot Winning Investment Properties In Singapore
Investing in real estate is an exciting and potentially lucrative venture. In Singapore, a thriving property market attracts both local...
Read More
TLDR
In 2021, the real estate market saw a surge in demand due to low interest rates and supply chain disruptions. The upcoming hike in interest rates may worry some homebuyers, but historical data shows that well-planned property investments can still yield substantial profits despite interest rate fluctuations. Rising interest rates are often linked to inflation, which can actually drive property prices up. Focusing on other key factors besides interest rates when choosing an investment property is crucial for maximizing returns.
We have all seen in 2021, an amazing year for sellers as we saw property prices hitting new peaks. A pent-up buying demand caused by impacts on tourism and uncertainties in the financial markets during the Covid-19 pandemic has steered many to the real estate market. Adding fuel to the hungry fire, delays in construction and rising costs in materials caused by global supply chain disruption and manpower crunch amplified the heat further.
This huge spike in demand against the depleting supplies has forced many homebuyers to sweep up the unsold inventory causing it to hit a record low of 19,409 in 2Q2021.
Homebuyers were further enticed by the increase in their purchasing power with interest rates hitting an all-time low.
Fast-forward to the present, as the economy is moving towards recovery, there are plans by the US Fed to raise interest rates for the first time since 2018. As most of you might know, Singapore’s interest rates are closely pegged to the movements of the US Fed’s interest rate.
So how will the imminent hike in interest rates affect you?
To better understand this, let’s first take a look at the types of interest rates offered here in Singapore.
Total Debt Servicing Ratio (TDSR)
Total Debt Servicing Ratio is a financial safety mechanism introduced by the Singapore Government to ensure that its people are not overleveraging and have the necessary financial capabilities to pay off their loans.
The Impacts Of Rising Interest Rates
Consumers are afraid of raising interest rates because it affects the eventual amount home buyers have to pay after calculating accrued interest from their home loans.
What if I tell you that whether the interest rate is moving upwards or downwards has minimal effects on your home – if you’ve made calculated considerations on buying your home?
Many would think that it’s a bad time to be thinking about buying a home when interest rates are set to hike, but let the statistics and examples below reveal to you the truth about the relationship between the property market and interest rates.
Looking at Figure 1 below, property prices have been on an incline over the past 20 years. In fact, since 2010Q1, interest rates have been relatively flat except for 2015Q1 when they started surging and then slumming again when the pandemic came.
Figure 1: PPI vs Interest rates (2002Q1 to 2021Q3)
Does it mean that people who bought properties between 2015Q1 and the pandemic suffered losses when the interest rates flattened over the last 2 years?
You will be very surprised to find out that not only did they not suffer a loss, but many buyers made extremely lucrative returns.
Just as buyers of Twin Vew in Figure 2 below, who bought their property at one of the peaks for interest rates in 2018, and managed to make close to a whopping half a million dollars when they sold it in 2021.
Interest rates for mortgages may be one of the most important concerns you may have when purchasing a property. However, few realised that it should not be the most important factor to consider when it comes to choosing the right property for reaping good profits. The case study above clearly illustrates that rising interest rates did not hinder the growth of a well-planned and selected property.
Figure 2: Historical profitable transactions for Twin Vew
Here’s another example for you, Treasure @ Tampines in Figure 3 below, the unit that was bought when the interest rates were high in 2019Q2 also managed to make tremendous returns of $416,000 in just less than 3 years.
This could be you if you knew exactly what to buy and when, instead of worrying about interest rates. Ultimately, the growth of property prices greatly overshadows hiking interest rates. 
Figure 3: Historical profitable transactions for Treasure @ Tampines
To understand the rationale of why hikes in interest rates are not causing the property market to crumble or stagnate, one has to understand the reason why interest rates are increasing.
In fact, we all know that inflation has caused the increase in prices of almost everything money can buy – that includes property. And in order for the monetary authority to mitigate inflation, increasing the interest rate is one of the most effective tools to do so. So even if there isn’t any growth in the real estate market over the next few years, we will possibly see property prices escalate solely fuelled by inflation.
What does this mean for homebuyers?
Focusing on the wrong thing may incur a heftier opportunity cost. The rising interest rates and other trigger factors* should be an indication for investors or homebuyers to start taking swift action.
It is monumentally tough for anyone to time the market but there is always a way to sift out the ideal investment property that could reap the best possible rewards.
Hit me up and I shall share with you the other factors* to look out for when choosing the ideal investment property.
You May Also Like …
Top 5 Best Urban Hiking Trails in Singapore
Singapore, known as the Garden City, is a bustling metropolis that offers a multitude of parks and nature reserves for...
Read More
Should You Be Upgrading To A Condo In 2023?
TLDR The 2022/23 property market is experiencing high prices, making it challenging for individuals to decide whether to upgrade their...
Read More
I Decided to Pay the Additional Buyer’s Stamp Duty to Purchase a Condominium While Retaining My HDB: My Reasons
TLDR Despite a 20% Additional Buyer’s Stamp Duty (ABSD) for second properties in Singapore, Yang chose to hold onto his...
Read More
Top 5 : Is Investing In Properties Worth In Singapore?
Investing in properties has long been considered a reliable and profitable venture, and Singapore, with its robust real estate market,...
Read More
Singapore Luxury Property: 5 Reasons to Add it to Your Trophy Collection
Singapore Luxury Property: 5 Reasons to Add it to Your Trophy Collection When it comes to luxury property investments, Singapore...
Read More
Travel Without Worry: The 5 Best Telco Companies For International Roaming In Singapore
Travel Without Worry: The 5 Best Telco Companies For International Roaming In Singapore When it comes to choosing a mobile...
Read More
5 Disastrous Property Transaction Nightmares (and How to Avoid Them)!
TLDR When attempting to sell your property, various worst-case scenarios can hinder the sale process significantly. These scenarios include buyers...
Read More
Top 5 Best Hidden Photography Locations in Singapore
Singapore, a vibrant city-state known for its iconic landmarks and bustling urban landscape, is also home to numerous hidden gems...
Read More
5 Things to Know About the Singapore Property Tax System
5 Things to Know About the Singapore Property Tax System Here are 5 things you need to know about the...
Read More
The Top 10 Traits Of A Good Real Estate Agent
TLDR Jayson Ang, a reputable real estate agent in Singapore, offers extensive experience and a data-driven approach to guide clients...
Read More
6 Must-Know Factors to Consider When Purchasing a Resale HDB in 2023
TLDR When buying a resale flat in Singapore, make sure to walk around the neighborhood to assess actual distances, check...
Read More
Learning Hard Truths in Property Investment: Timing the Market Can Hurt
TLDR The blog post delves into the complexities of market timing in property investment, highlighting the risks and challenges associated...
Read More
Top 5 Dim Sum Restaurants in Singapore
Dim sum, a popular culinary delight that originated from China, has made its way into the hearts and taste buds...
Read More
3 Steps to Prevent Rental Scams
TLDR: Prevent Rental Scams in Real Estate Scammers are targeting prospective tenants by impersonating Real Estate Salespersons (RES) to deceive...
Read More
Buying a Second Property – 3 Key Factors to Consider
TLDR When navigating the complexities of purchasing a second property in Singapore, ensure you meet eligibility criteria, consider affordability factors...
Read More
7 Lesser-Known ‘Minor’ Condo Problems That Could Lead to Major Issues Down the Line
TLDR When choosing a condo, it's crucial to look beyond MRT station proximity, developer reputation, and price. Overlooked details can...
Read More
Is Singapore’s Property Market on the Verge of a Crash? Understanding the 5 Factors at Play
The Singapore property market has long been an attractive option for both local and international investors. However, as with any...
Read More
5 Reasons Why Districts 9 and 10 are the Next Big Thing in Singapore Real Estate
Singapore is renowned for its thriving real estate market, with many desirable neighborhoods and top-notch properties. However, when it comes...
Read More
Planning for Retirement: Considerations for Downsizing Your Property
TLDR Downsizing your home for retirement can bring financial security, closer family ties, and new adventures. Consider the benefits of...
Read More
