SINGAPORE: Home owners in Singapore will likely have to pay higher mortgage rates for a little longer, according to some market watchers.
Currently, the mortgage rates can be as high as above 4 per cent. An expected percentage point dip in interest rates is now likely to only take place at the end of next year, instead of this year.
This comes as the United States Federal Reserve is cutting interest rates more slowly than expected as inflation remains high.
Observers said more homeowners are switching to a fixed mortgage rate amid such a high interest rate environment.
Real estate agents told CNA that it has become harder to find tenants today, as there are more apartments available in the market.
Last year, they could close a rental deal with just one viewing.
This year, however, they have observed that it takes an average of 10 viewings before they can secure a tenant.
Property agents said they will have to put up the unit for about a month. During the rental peak, it was not difficult for a unit to be instantly snapped up.
Landlords may also need to lower their asking rent to find a tenant, they added.
For instance, a one-bedroom unit near the city centre is being put up for rent at around S$4,000 (US$2,940) per month, about S$500 less than what the owner was hoping for, said real estate agent Daryl Ng.
“We go the extra mile right now to provide more services. Tenants would want to have less hassle, (so) we provide Wi-Fi services and we can also include the utilities,” said Mr Ng.
“It all depends on what they want and what they need, then we come up with the pricing for them. This is what we have opened up, so we have a wider range of tenants.”
Earning less from rent means his client is being pinched from both ends, as she needs the extra income to help pay off the mortgage on her new flat.
The Federal Reserve Building in Washington, United States. The Fed is cutting interest rates more slowly than expected as inflation remains high. (Photo: REUTERS/Joshua Roberts)
Some analysts said home owners will have to bite the bullet for longer, with mortgage rates taking longer than expected to come down.
Interest rates could fall half a percentage point by the end of this year, instead of a full percentage point, said one analyst.
Mr David Baey, CEO of mortgage brokering platform Mortgage Master, said there are many factors in play.
“Interest rates cannot stay high, if the Singapore dollar is going to continue to strengthen and strengthen with the high interest rates,” he noted.
“At the same time, the property market is also tapering off. So with the drop in demand and fewer transactions, interest rates don't have to be high to stop people from buying houses.
“So in all contexts, actually, interest rates should start dropping. But the biggest factor is US Fed rates. And if US Fed rates don't drop, it then makes everything drop slower.”
Mr Baey encouraged home owners to switch from floating rates to fixed ones amid the uncertain outlook.
“Home loans are the biggest loans you probably have. You should be conservative about it, not taking risks with it.”
Property observers said the silver lining is that interest rates appear to have peaked. Buyers are also more mentally prepared to service their loans at a higher rate.
“For now, the impact itself is actually not as much compared to previously when interest rates went up rapidly. So the buying volume is quite likely to actually stay at the current level,” said Mr Lee Sze Teck, senior director of data analytics at Huttons Real Estate Group.
“The decision point for a lot of buyers right now is whether they feel confident enough to enter the market, because they have to be assured that their jobs are secure and the company's doing well.”
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Currently, the mortgage rates can be as high as above 4 per cent. An expected percentage point dip in interest rates is now likely to only take place at the end of next year, instead of this year.
This comes as the United States Federal Reserve is cutting interest rates more slowly than expected as inflation remains high.
Observers said more homeowners are switching to a fixed mortgage rate amid such a high interest rate environment.
LOWERING THEIR ASKING RENT
Real estate agents told CNA that it has become harder to find tenants today, as there are more apartments available in the market.
Last year, they could close a rental deal with just one viewing.
This year, however, they have observed that it takes an average of 10 viewings before they can secure a tenant.
Property agents said they will have to put up the unit for about a month. During the rental peak, it was not difficult for a unit to be instantly snapped up.
Landlords may also need to lower their asking rent to find a tenant, they added.
For instance, a one-bedroom unit near the city centre is being put up for rent at around S$4,000 (US$2,940) per month, about S$500 less than what the owner was hoping for, said real estate agent Daryl Ng.
“We go the extra mile right now to provide more services. Tenants would want to have less hassle, (so) we provide Wi-Fi services and we can also include the utilities,” said Mr Ng.
“It all depends on what they want and what they need, then we come up with the pricing for them. This is what we have opened up, so we have a wider range of tenants.”
Earning less from rent means his client is being pinched from both ends, as she needs the extra income to help pay off the mortgage on her new flat.
The Federal Reserve Building in Washington, United States. The Fed is cutting interest rates more slowly than expected as inflation remains high. (Photo: REUTERS/Joshua Roberts)
INTEREST RATES APPEAR TO HAVE PEAKED
Some analysts said home owners will have to bite the bullet for longer, with mortgage rates taking longer than expected to come down.
Interest rates could fall half a percentage point by the end of this year, instead of a full percentage point, said one analyst.
Mr David Baey, CEO of mortgage brokering platform Mortgage Master, said there are many factors in play.
“Interest rates cannot stay high, if the Singapore dollar is going to continue to strengthen and strengthen with the high interest rates,” he noted.
“At the same time, the property market is also tapering off. So with the drop in demand and fewer transactions, interest rates don't have to be high to stop people from buying houses.
“So in all contexts, actually, interest rates should start dropping. But the biggest factor is US Fed rates. And if US Fed rates don't drop, it then makes everything drop slower.”
Mr Baey encouraged home owners to switch from floating rates to fixed ones amid the uncertain outlook.
“Home loans are the biggest loans you probably have. You should be conservative about it, not taking risks with it.”
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Property observers said the silver lining is that interest rates appear to have peaked. Buyers are also more mentally prepared to service their loans at a higher rate.
“For now, the impact itself is actually not as much compared to previously when interest rates went up rapidly. So the buying volume is quite likely to actually stay at the current level,” said Mr Lee Sze Teck, senior director of data analytics at Huttons Real Estate Group.
“The decision point for a lot of buyers right now is whether they feel confident enough to enter the market, because they have to be assured that their jobs are secure and the company's doing well.”
Continue reading...