Fraud Blocker
Your search results

Rising Interest Rates : A Cause for Concern?

Posted by Jayson Ang on December 7, 2022
| 0

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 Factors : Location More Important Than Freehold Status?
Mandarin Top 5

Top 5 Factors : Location More Important Than Freehold Status?

When it comes to purchasing a property, there are numerous factors that potential buyers need to consider. While the debate...
Read More
5 Factors : Why Singapore’s Property Market Is A Good Hedge Against Inflation
Mandarin Top 5

5 Factors : Why Singapore’s Property Market Is A Good Hedge Against Inflation

As inflation becomes a growing concern for investors worldwide, the stability of Singapore's property market has become an attractive option...
Read More
Top 5 Fine Dining Restaurants in Singapore if You are Visiting Us!
Mandarin Top 5

Top 5 Fine Dining Restaurants in Singapore if You are Visiting Us!

Top 5 Fine Dining Restaurants in Singapore if You are Visiting Us! Singapore is known for its diverse and delicious...
Read More
Learning Hard Truths in Property Investment: Timing the Market Can Hurt
All Buying Tips Opinion Selling Tips

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
Thinking About Investing In An Old Landed Property In Singapore? 7 Crucial Tips To Keep In Mind Before You Make Your Move
All Buying Tips

Thinking About Investing In An Old Landed Property In Singapore? 7 Crucial Tips To Keep In Mind Before You Make Your Move

TLDR Older properties come with unique challenges due to outdated design elements, potential roofing issues, odd land shapes, basement drawbacks,...
Read More
How to Build a Property Empire in Singapore: Scaling Your Investments
Mandarin Top 5

How to Build a Property Empire in Singapore: Scaling Your Investments

Real estate investing is a popular way to build wealth and generate passive income. However, like any investment, it comes...
Read More
Top 5 Factors : What Is Considered “Luxury” In The Singapore Property Market?
Mandarin Top 5

Top 5 Factors : What Is Considered “Luxury” In The Singapore Property Market?

The Singapore property market is known for its high-quality residential properties, attracting both local and international buyers. Luxury real estate...
Read More
Top 5 Must-Know Facts about Luxury Properties in Districts 9 of Singapore
Mandarin Top 5

Top 5 Must-Know Facts about Luxury Properties in Districts 9 of Singapore

Singapore, a bustling city-state known for its impressive skyline and vibrant economy, has always been an attractive destination for property...
Read More
Top 5 Factors : Singapore Real Estate Investing vs Stocks and Bonds: Which is Better?
Mandarin Top 5

Top 5 Factors : Singapore Real Estate Investing vs Stocks and Bonds: Which is Better?

Investing is an essential aspect of wealth creation and financial planning. With a plethora of investment options available, it can...
Read More
I Decided to Pay the Additional Buyer’s Stamp Duty to Purchase a Condominium While Retaining My HDB: My Reasons
All Blog Posts Buying Tips Opinion

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 Factors : Buying Resale vs New Launch Property in Singapore: Which is Better?
Mandarin Top 5

Top 5 Factors : Buying Resale vs New Launch Property in Singapore: Which is Better?

The decision to invest in a property in Singapore can be both exciting and daunting, especially when faced with the...
Read More
5 Top Reasons Why Chinese Love to Invest in Singapore Property Market Today
Mandarin Top 5

5 Top Reasons Why Chinese Love to Invest in Singapore Property Market Today

Here are the top 5 reasons why Chinese love to invest in Singapore's property market today. 1. Political stability: Singapore...
Read More
How Can You Prepare for Retirement in an Expensive Real Estate Market? Discover Your Options Now!
All Blog Posts Buying Tips Opinion

How Can You Prepare for Retirement in an Expensive Real Estate Market? Discover Your Options Now!

TLDR The article discusses the challenges of investing in a second property for retirement amidst Singapore's real estate market conditions....
Read More
7 Frequently Overlooked Questions That New Condo Buyers Should Ask At The Showflat To Avoid Any Regrets In The Future!
All Buying Tips Opinion

7 Frequently Overlooked Questions That New Condo Buyers Should Ask At The Showflat To Avoid Any Regrets In The Future!

TLDR Newly launched condominium buyers face uncertainties about price changes, proximity to schools, construction methods, maintenance costs, elevator availability, commercial...
Read More
Exciting News: Affordable Housing in Singapore by 2024?
All Buying Tips Opinion

Exciting News: Affordable Housing in Singapore by 2024?

TLDR The real estate market in Singapore is experiencing shifts in housing supply and demand, influenced by factors like mortgage...
Read More
Larger Living Spaces: The New Demand Surge Post-Pandemic
All Buying Tips Opinion

Larger Living Spaces: The New Demand Surge Post-Pandemic

TLDR We explore the significant impact of digital marketing strategies on business growth in today's competitive landscape. It highlights the...
Read More
How to Maximise Your Home Value Before Selling : 6 Simple Steps
All Blog Posts Opinion

How to Maximise Your Home Value Before Selling : 6 Simple Steps

TLDR When looking to sell your home, consider simple ways to boost its value without costly renovations. Organize living spaces,...
Read More
Top 5 Factors That Real Estate Investors Should Consider When Selecting A Luxury Condo In Singapore
Mandarin Top 5

Top 5 Factors That Real Estate Investors Should Consider When Selecting A Luxury Condo In Singapore

Investing in a luxury condominium in Singapore is an attractive option for real estate investors seeking high-quality properties with potential...
Read More
Top 5 Best Hidden Boutique Hotels in Singapore
Mandarin Top 5

Top 5 Best Hidden Boutique Hotels in Singapore

Singapore, a vibrant city-state known for its iconic landmarks and diverse culture, offers a plethora of accommodation options for travelers....
Read More
3 Exciting Residential Sites Coming Soon!
All Buying Tips

3 Exciting Residential Sites Coming Soon!

TLDR The Lion City is undergoing rejuvenation with upcoming developments in coveted areas like Clementi and sites near MRT stations....
Read More
1 3 4 5 6 7 27

Compare Listings