Some consultants believe the rising interest rates will not significantly affect the ability of homebuyers to service monthly mortgages.
“Rising mortgage costs will reduce housing demand but the decline is not expected to be significant,” said Colliers International’s Deputy Managing Director Grace Ng. This is because “interest rates are expected to remain low given that the US economy has yet to see a full recovery and Europe has just announced a series of stimulus.”
And with the Total Debt Servicing Ratio (TDSR) in place, banks have to factor in a higher interest rate of 3.5 percent when computing the loan eligibility of buyers, she added.
Owners who are holding multiple units or have over-committed to high loan quantums may face further “cash crunch”, said Ng. Colliers estimates around 78,402 units are set to be completed by 2018, of which 20,824 units are expected to be completed this year.
“If for a prolonged period, these property owners are not able to rent out their properties and service their mortgage loans, the market could see more mortgagee sales this year,” she added. The number of mortgagee sale listings is expected to increase from 160 last year to 200 this year.
For investors who can manage their cashflow, Ng believes they may be better off renting the property out even at lower rent in order that may have some income to pay for their monthly mortgage bills, than selling their units at lower prices.
For owner-occupiers, Ng believes it is the right time to commit to their preferred property. She noted a further five to eight percent slide in private home prices and a 10 percent drop in luxury home prices this year may offer a good opportunity for homebuyers.