After three years of super-low interest rates and 60% price growth Barclays believes Singapore property prices could be vulnerable to a sharp rate increase.
“Our current base case is flat private home prices to FY16E, but we estimate these could fall up to 23% should mortgage rates increase by 200 bps within a short period, all things remaining constant,” it says.
The outcome could be worse if a mortgage rate increase coincides with bumper supply. However, it notes “Drastic price collapses could be mitigated if there were a more gradual increase in interest rates, accompanied by income growth, some expansion of the mortgage-servicing ratio and given more prudent owners and investors who have been taking a longer-term view after seven rounds of measures since September 2009.”
The house continues to like Overweight-rated CapitaLand (C31.SG) for its more diversified profile and recovering ROE.
Source – TheEdge – 28 Jun 2013
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