Property Buyers Should Consider Future Interest Rate Hikes (May 2013)


Source: CNA – Property buyers should consider future interest rate hikes: Khaw

Notable excerpts:

National Development Minister Khaw Boon Wan has urged those who might be looking to buy property to take into account future spikes in interest rates.

Speaking during a dialogue with young Singaporeans, he also cautioned buyers not to over-commit.

He explained that the current low interest rates for home loans will not last forever, and the eventual rate may be many percentage points higher than it is today.

Some 150 youths from Sembawang spent Saturday afternoon discussing their hopes and aspirations for Singapore with their MP Mr Khaw.

They also engaged the Minister in an hour-long dialogue, as part of the Our Singapore Conversation.

Even though housing may not be an immediate concern for them, the issue did not escape attention.

Mr Khaw assured the youths that housing will be made available and kept affordable.

He also offered advice for property buyers.Mr Khaw said: “They assume two things. Property prices will keep going (up). Two, interest rates will keep on remaining low. Both are wrong and therefore one day, both will collapse on them. So, if you are over-committed, let’s say you can only afford a 3-room flat, (but) you decide to buy five room flat. Yes, based on today’s interest rates you can afford a five-room flat. But, when interest rates go up as it will, you will no longer be able to afford a five-room flat and what will happen, your bank will start calling you up to please top up or sell your flat and that’s when trouble starts.

“In addition, Mr Khaw said the high property prices will not last in the long run.

At the same time, he acknowledged he cannot be certain when and how much prices will come down.

He added: “Only when you can get enough buyers who can afford, will prices stay up, if not they will come down. Today because of low interest rates, this bubble is being pushed up and sustained longer than it should have. So, it will collapse in a matter of time and therefore do not think that prices will keep on going up.


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