5 Reasons Why It’s A Great Time To Buy Property In Singapore In 2024
Singapore's property market is known for its stability, high demand and strong returns. With a growing population, low unemployment rates,...
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 Reasons : Why Do Singaporeans Still Flood The Property Market?
Singapore, a thriving city-state with a robust economy and a strong demand for real estate, has always been an attractive...
Read More
Why Property Investing is the Key to Early Retirement in Singapore
Investing in property is a popular way to build wealth and achieve financial freedom in Singapore. With the right strategies...
Read More
5 Qualities to Look for in an Agent to Ensure a Smooth Transaction
5 Qualities to Look for in an Agent to Ensure a Smooth Transaction Here are 5 qualities to look for...
Read More
Should I Buy In A Newly MOP HDB Or An Older Resale HDB?
TLDR When deciding between a recently MOP-ed HDB property and an older resale HDB property in Singapore, various factors come...
Read More
2024 Will Be A Buyers Market
TLDR 2023 saw a roller-coaster ride in the real estate market, with various challenges like high interest rates and geopolitical...
Read More
An Essential Guide to Buying a Home in Singapore 2023
TLDR When navigating the complexities of purchasing a property in Singapore, ensure you meet eligibility criteria, consider affordability factors, and...
Read More
What Is Cash Over Valuation in HDB (COV)
TLDR Cash Over Valuation (COV) in HDB resale flats occurs when the purchase price exceeds HDB's valuation. COV cannot be...
Read More
Singapore’s Urban Landscape Transformation: 5 Key Things You Need to Know
Singapore's urban landscape has undergone significant changes over the years, with the city constantly evolving to create a sustainable and...
Read More
Your Key to a Happy Retirement in Your HDB? Let’s Unveil The Mystery Behind the Lease Buyback Scheme!
TLDR The Lease Buyback Scheme (LBS) is gaining traction among older Singaporeans looking to boost their retirement income by selling...
Read More
Here’s How Property Data Can Be Misleading: Navigating Through Common Misunderstandings
TLDR When comparing property prices, discrepancies can arise due to various factors like timing of purchase, scarcity in niche projects,...
Read More
Mortgage Interest : The True Cost of Buying and Owning Properties in Singapore
TLDR When considering buying a property in Singapore, it's crucial to understand the true costs and risks involved. High monthly...
Read More
Top 5 Street Food Markets in Singapore
Singapore, a melting pot of diverse cultures, offers an incredible array of street food that tantalizes the taste buds of...
Read More
Are You Ready to Take on the Singapore Property Market in 2023? 12 Reasons to Be Hopeful (Or Wary)!
2022 sure was a rollercoaster ride for the property market, and the world! From war in Europe to skyrocketing interest...
Read More
Discover the Best Breakfast in Singapore: Top 5 Must-Try Spots!
Trying out some of the best breakfast places, I've put together a list of the top 5 must-try breakfast spots...
Read More
Expert Tips : Top Property Investment Strategies in Singapore
TLDR Singapore offers lucrative property investment opportunities with its stable economy and political climate. To succeed, investors should conduct thorough...
Read More
5 Singapore Property Investing Myths Debunked
In the world of property investing, misconceptions can lead to poor decisions and financial losses. In Singapore, there are several...
Read More
Top 5 Rooftop Bars in Singapore with Amazing Views
Top 5 Rooftop Bars in Singapore with Amazing Views Singapore, the Lion City, is known for its stunning skyline and...
Read More
Craving Dream Homes in the Urban Jungle: The Singaporean Dilemma Unveiled
TLDR The housing landscape in Singapore reflects evolving aspirations and desires, especially among the younger generation. Owning private property is...
Read More
What If Sellers Back Out of a Deal?
TLDR When a seller unexpectedly withdraws from a property transaction before a contract is signed, they are legally allowed to...
Read More
