Jittery investors shy away from local properties on back of dreaded SIBOR spike

They are holding back as borrowing costs rise.

Investors are holding back from pouring cash into local properties on back of the SIBOR's sharp spike, a report by CBRE revealed.

CBRE noted that investor sentiment remains cautious as investors are becoming wary of the rising SIBOR.
Property investment volume registered a 17% year-on-year decline to $3.35b in the first quarter, with majority of deals priced between $100 and $300m.

The office sector bagged the lion's share of private investment volume in the quarter. The biggest deal was the $1.17b acquisition of AXA Tower by a consortium of investors led by Perennial Real Estate.

Under the public sector investment sales, CBRE noted that the government sold sites at a slower pace to indirectly reduce housing supply while allowing more time for developers to dispose the 27,000 unsold units in their inventory.

Data released today by the Monetary Authority of Singapore (MAS) showed the three-month SIBOR rose sharply from just 0.67% as at end-January 2015 to 1.01% as at end-March. 

The MAS noted that this reflected market expectations of prospective interest rate hikes in the US and of a strengthening of the greenback against the SSingapore dollar at a time of general appreciation of the US$ against the major currencies. 

"The rise in interest rates will mean higher borrowing costs. Investors are becoming wary of the rising SIBOR. With little prospects of rents rising in the short term, CBRE Research expects to see some compression in yields," the report stated.