{"id":27647,"date":"2019-07-03T11:50:20","date_gmt":"2019-07-03T03:50:20","guid":{"rendered":"https:\/\/www.99.co\/blog\/singapore\/?p=27647"},"modified":"2022-06-13T17:23:41","modified_gmt":"2022-06-13T09:23:41","slug":"what-could-happen-to-singapore-property-in-a-2020-downturn","status":"publish","type":"post","link":"https:\/\/www.99.co\/singapore\/insider\/what-could-happen-to-singapore-property-in-a-2020-downturn\/","title":{"rendered":"What Could Happen to Singapore Property in a 2020 Downturn?"},"content":{"rendered":"
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We’re expecting a potential recession in 2020, unless the US and China can sort out their differences. Right now, that seems about as probable as losing weight on a pure ghee diet. So let’s look at what could happen:<\/p>\n

1. There’s a good chance property loan rates will stop rising (and maybe even dip)<\/h3>\n

This won’t be any of our doing; the likely cause will be the American Federal Reserve (the Fed). The Fed lowers interest rates when the economy goes bad, as a stimulus measure.\u00a0 This was what happened during the last financial crisis in 2008, and it sent home loans rates to\u00a0 record lows for the past decade.<\/p>\n

So far, the Fed has been steadily rising rates again as the US economy recovers. In Singapore, this has led to the Singapore Interbank Offered Rate (SIBOR) having more than doubled over the last few years. Had the US economy continued to improve, we would expect the rates to just steadily go up until the day it comes close to historical norms (that’s about 3.7 to four per cent per annum).<\/p>\n

Now however, the rate hikes have stopped<\/a>. This is mostly due to the effects of the Sino-US trade war, and worries about its impact on the US working class (in particular those in agriculture, such as farmhands). If the economy nosedives in 2020, the Fed may even lower <\/em>interest rates to compensate.<\/p>\n

This means Singapore’s property loans are likely to stay at current levels, or perhaps even dip, because of trade tensions.<\/p>\n

\"Loan
Property loan rates will stop rising or even dip during the downturn.<\/figcaption><\/figure>\n

2. The CCR properties will likely take the first hit<\/h3>\n

The Core Central Region (CCR) is characterised by high-end, luxury properties; many of which are not owner-occupied. These properties are often in the hands of landlords, who rent them out to well-heeled expatriates. But because of the tenant demographic, this segment is often the first to be affected by a bad economy.<\/p>\n

We tend to see the same pattern among big companies in a downturn:<\/p>\n