No drastic downturn in Singapore property market due to US rate hike: JLL

By Tan Chee Yuen / JLL, The Edge Property | January 12, 2016 2:45 PM SGT
The US Federal Reserve raised interest rates for the first time in nearly a decade, signalling improved economic conditions. The impacts on the key real estate markets in Asia Pacific are extensive amid rising concerns about further capital outflows from emerging markets.
JLL does not expect a drastic downturn in the Singapore property market due to the hike. “Some asset yields should ease marginally to accommodate the gradual rise in lending rates but otherwise, we do not foresee a drastic downshift in the property market here as a result of this recent hike”, according to Dr Chua Yang Liang, Head of Research Southeast Asia and Singapore.
“However, if domestic rates were to climb too drastically and the local and regional economies weaken further, this will have an adverse impact on the property market as households struggle to meet higher loan repayments amid a weak leasing market”, adds Dr Chua.
The hike should bode well for Japan as a stronger US economy will translate to a healthier Japanese economy, driven by exports to the US. The recovering US economy, coupled with Japan’s monetary easing policies, will weigh on the yen, which would also be supportive for Japan’s economy.
In Hong Kong, the hike has started to dampen market sentiment and the impact on commercial property segment is likely to be uneven. Prices of Grade A office are likely to hold firm given the current 10-year low vacancy rate and improving rental market.
Overleveraged China real estate developers or developers in with non-performing projects in lower tier cities will be facing pressure. However, healthy assets that are located in prime or first tier cities should face less impact than those assets that are located in more challenging markets.
For India’s property market, the US rate hike is unlikely to bring any impact due the opening up of domestic real estate market for foreign direct investment.
Meanwhile, the Australian property market is likely to continue enjoying 2015’s record levels of investment in the real estate sector by foreign buyers, particularly from Asia.