With the planned interest hike to 1.6% in 2023 and 2.1% in 2024, up from the current 0.9% is it still wise to continue with your plan to purchase property? To better understand the situation let’s examine the few factors that might contribute to the current “hot” market for property. For the past few months, we are seeing news reports about property prices reaching new high and the sale launches are selling like hot cakes. However the supply for property is not matching up with the demands due to the shortage of manpower due to restriction of Covid measure. Coupling that with a prolonged period of low interest rates environment it is natural that people will be more willing to explore the option of purchasing their dream home. With the above 2 factors it is inevitable that a frenzy for Singapore property would occur considering how land scarce Singapore is but is it sustainable?
Low interest rate policies was introduced to stimulate the economies post Covid but it has since caused high inflation that was not seen before. Low interest rate environment was not a sustainable long term measures and hence the previous “hot” property market will unlikely last. With that understanding it is be that the high property price will not be here to stay. With the potential interest rate hikes, home buyers will exercise more care before deciding to purchase a property as it is more expensive to take loan thereafter. While it sounds gloomy, it might after all be better for potential home buyer who are purchasing their first house for their own stay. To cool down the property market, our government have implement more cooling measures which will potentially tame the competition. HDB has also planned for more new launches for BTO flats which will not only provide more options for potential home seekers and will have the effect of reducing the price with more supply. Overall, the prices for property will normalize and go back to a fair value with the interest rate hikes and cooling measures in place.
In conclusion, potential home buyer would less likely to be adversely affect by the recent rate hikes and cooling measures implement and could still go ahead with their property purchase if your finances are soundly planned out. Things to look out for could be but not limited to TDLS and your cash flow which was featured in previous article. If in doubt, you could arrange a complimentary zoom session to assess your financial situation at 86113161.
Disclaimer: All information are for informational purposes only and should not be relied upon as financial advice.