US rate hike to dampen Singapore, HK property marts

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With the United States Federal Open Market Committee raising interest rates for the first time in nearly a decade, experts believe this may have an impact on markets across the globe, particularly real estate.

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According to Asian industry magazine Property Report, the US interest rate hike may have a resounding impact on some of the biggest property markets in the Asian region, namely Hong Kong and Singapore.

Citing a report from global real estate services firm Knight Frank, the property magazine predicted that the US Fed move could push up interest rates in markets with dollar-pegged currencies.

Knight Frank said residential products in Hong Kong and Singapore had benefited from cheap credit over the last few years.

“Holding everything else equal, an increase in interest rates will have a dampening effect on these two global cities as the cost of debt increases,” said Knight Frank. “We could see sales volumes compromised, as new purchasers see mortgage rates rise, and the attraction of property as an investment recede slightly.”

Property Report also cited data from CBRE Research, which predicts that Singapore will not have anymore yield compression in the city, as the rate hike puts pressure on capital values in Singapore, while the occupier market currently weakens.

CBRE said countries with a softer outlook for rental growth like China are at more risk of contracting yields. It noted that Hong Kong will suffer an impact on real estate demand, but this won’t be until beyond 2016, as interest rates there are currently so low and increases would be progressive.

Meanwhile, Knight Frank noted that emerging Asia Pacific countries might be less directly affected by the higher US interest rates, but further capital outflows could put pressure on domestic economies and residential property prices.

“Domestic economic performance will therefore be the key set of indicators to monitor,” said Knight Frank.

Catherine Talavera

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