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Interest rates will be "steady". How will landed properties move in Q1 2024?

Christmas came just in time this year, and the feds spilled the beans in their latest meeting – interest rates are going to remain “steady”. Additionally, they also dropped a hint about interest rates next year. A potential rate cut of 75 basis points is incoming, with a terminal value landing between 4.35% and 4.75%.

Our buyers have been bombarding us all year with questions about interest rates, trying to time their entry accordingly. And for sellers whose mortgages are tethered to interest rates, predicting the market in 2023 has been a rollercoaster, and this revelation feels like the year-end bonus everyone’s been holding their breath for.

The burning question: Will this mark the turning point for the landed property segment? Let’s look at what a lower interest rate means for the ecosystem – assuming that all parties think and act logically.

What this means for owners

Homeowners, especially those with high-value landed properties acquired through substantial loans, now find a window to consider refinancing or repricing. (Note: If you just locked in your mortgage yesterday, give those terms and conditions a thorough look to see if a conversion option opens up after a year.)

Once owners have repriced or refinanced, they're likely to stick to that position for a while. So, even if eager buyers are ready to pounce, new listings might not flood the market.

And even if owners decide to stick with their current mortgage terms, their positions might still be solid. According to a recent MAS review, Singapore's residential market maintains a healthy loan-to-value ratio of slightly over 40%, even with rising mortgages for most folks. In simple terms, owners are playing it safe, whittling down their mortgages rapidly by sticking to consistent monthly payment.

With increased holding power, these homeowners are more likely to bide their time for the perfect price. Consequently, sellers in the market might have the upper hand, assuming that buyers can now stretch their budgets for a higher price tag.

For Jackie, this news means a bit more room to breathe, prompting him to reprice a mortgage that had been fixed for two years. Personally, I'm in the midst of rebuilding my house, having taken both a primary home loan and a construction loan. While loans can't be repriced or refinanced until I get the TOP cert, I'm in luck—I'll be getting it in the first quarter of 2024. If you're eyeing a rebuild too, 2024 might just be your golden opportunity.

What this means for buyers

Jackie anticipates that potential buyers currently on the sidelines will seize the opportunity, a sentiment echoed by Raama, who predicts a substantial uptick in activity. This surge is expected not only due to the latest news but also the heightened post-holiday season momentum.In reality, even before the feds’ announcement, we’ve seen an interest in enquiries and viewing activity, notably among younger buyers.

These high flyers don’t just have a loan tenure of 30 years; they also have a clear vision of buying their first landed property, even if it means making the quantum leap and levelling up from an HDB flat. (HDB sellers enjoy a certain degree of protection from the fluctuations in interest rates since they can secure loans directly from HDB. However, for those sellers eyeing a monumental jump from an HDB flat to a swanky landed property, it's time to crunch the numbers and stay vigilant for any upcoming updates.)

A drop in interest rates is music to the ears of these buyers because loans are now more affordable, providing their budgets with a little extra flexibility. But there's a catch that buyers should be aware of – we're still waiting for some leniency from MAS regarding the stress test. Currently stuck at 4%, it's somewhat of a speed bump on our road to leveraging those lower rates. If this doesn't change quickly enough, it could limit your access to debt and, consequently, the market, even as the announcement fuels positivity and reduces financing costs.

What it means for sellers

In Singapore, there will always be an underlying demand for landed properties, but the perennial issue lies in the scarcity of sellers. With fewer people putting their properties on the market and more eager buyers in the mix, will we see a surge in prices in Q1 2024 or a more subdued scenario as everyone adopts a wait-and-see approach? The pivotal factor here is the sellers. For those wearing the seller's hat in 2024, the crucial decision revolves around whether they aim to establish a new price point. Sellers, being prospective buyers themselves, face a dilemma. If they intend to secure their next home in a low-interest rate environment, they might need to make some concessions. So, we don't anticipate a significant gap emerging between buyers and sellers.

Buying or selling a landed property in 2024

All in all, while everyone eagerly awaits low interest rates, potential buyers might find themselves caught in a catch-22 situation – poised and ready but lacking a viable entry point into the market. If they have a long and specific checklist, their options become even more restricted. For instance, aspiring buyers seeking a certain type of landed property in a popular district may be in for a disappointment.

It doesn’t help that more often than not, no two landed properties in Singapore are the. Unlike buying a condo, where you merely have to choose your preferred facing direction, stack, and layout, this segment is rife with variables. Buyers tend to deliberate over intricate details to the point of missing the boat. We've encountered clients who've been window-shopping for 1.5 years without making a move, and during this time, prices have skyrocketed by 50%. 

Having your cake and eating it too, with zero calories, isn't a realistic expectation. Even with the best news on the horizon, uninformed buyers may simply float. On the other hand, gor homeowners whose landed properties no longer fulfil their needs, we urge you to pass the torch to the next eager buyer. 

If you're unsure about your next move, you can always lean on us. We've been around the block, having made both savvy and not-so-savvy moves on our own property journey, and we're more than equipped to help fast-track your journey.


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