Since 2019, much of the global economy has been ravaged and disrupted by Covid-19 or so we thought. In a recent surprise move by the Monetary Authority of Singapore (MAS), Singapore’s monetary policy was tightened through the appreciation of the Sing Dollar, citing a highest inflation in 9 years.
Adjustment of monetary policies is usually less intrusive but just one of the many instruments in the Government’s repertoire. What we feel will impact Singaporeans most will be the adjustment of fiscal policies and there are many indications of ‘double tightening’ in 2022. Hence, this begs the question: “Are you over-leveraged?”
Reduction in Loan-to-Value
Prior to above’s measure, on the night of the 15th of December 2021, without warning, the Government implemented a round of cooling measures to combat the overheated property markets. Whilst we have yet to see an immediate impact as prices are still climbing, these couple of back to back policies revisions serve as a fore-warning of what is to come.
GST
We have received repeated reminders by our Prime Minister that the 2% GST hike has been delayed long enough and we should expect it sooner, rather than later. Stay Tuned to Budget 2022 on the 18th of February for further details. An additional 20 cents per $10.00 spent may not sound like much, however, everything adds up and it gets significantly larger on big ticket items.
Interest Rates Hikes
Lending rates have been at historical lows for some time now and Singaporeans might be experiencing the ‘frog in boiling pot’ syndrome, overreaching with their property purchases . However, with the Fed announcing significant rate hikes within this year itself, Singapore’s SORA will undoubtedly follow suit and property being a large ticket item will definitely see a significant impact on monthly mortgages.
Below are some simulated scenarios and the impact could be anywhere from low hundreds to a few thousand every month.
| Type | Est price | Loan amount | Tenure |
| 2BR | $ 1,200,000.00 | $ 900,000.00 | 30 |
| Interest rates | Mortgage (monthly) | Difference | |
| 1% | $2,894.76 | ||
| 1.5% | $3,106.08 | $211.32 | |
| 1.8% | $3,237.29 | $131.21 | |
| 2.0% | $3,326.58 | $89.29 | |
| 2.5% | $3,556.09 | $229.51 |
| Type | Est price | Loan amount | Tenure |
| 3BR | $ 1,700,000.00 | $ 1,275,000.00 | 30 |
| Interest rates | Mortgage (monthly) | Difference | |
| 1% | $4,100.90 | ||
| 1.5% | $4,400.28 | $299.38 | |
| 1.8% | $4,586.16 | $185.88 | |
| 2.0% | $4,712.65 | $126.49 | |
| 2.5% | $5,037.79 | $325.14 |
| Type | Est price | Loan amount | Tenure |
| 4BR | $ 2,300,000.00 | $ 1,725,000.00 | 30 |
| Interest rates | Mortgage (monthly) | Difference | |
| 1% | $5,548.28 | ||
| 1.5% | $5,953.32 | $405.04 | |
| 1.8% | $6,204.80 | $251.48 | |
| 2.0% | $6,375.94 | $171.14 | |
| 2.5% | $6,815.84 | $439.90 |
Most realtors will generally profile their clients’ risk appetite to provide our best advice, as properties for own-stay and investments have very different considerations. If you are currently shopping around for your next home or would like some guidance, do reach out to us.
What’s Next
As there is much uncertainty moving forward, we do suggest reaching out to your personal banker or mortgage specialists for professional advice to lower your exposure!
