Real estate investment sentiment dampened as US Fed dawdles

Investors are keeping to the sidelines.

The uncertainty over the timing of the US Federal Reserve’s interest rate hike will keep a lid on real estate investment sentiment in Singapore.

Analysts noted that investors are holding back due to doubts over the schedule of the Fed’s liftoff, which is generally expected to happen within the year.

“Uncertainty over the timing of the US rate hike and further yield compressions might result in fewer acquisitions especially in the commercial sector,” stated a report by DTZ.

Colliers added that the main risk to the investment sales market continues to be the impending rise in interest rates, especially since the Singapore Interbank Offered Rate (SIBOR) has been on the rise in Q1.

“As most of the mortgages in Singapore are pegged to SIBOR, the rise in SIBOR rates translates to overall higher financing costs for potential property investors. Hence, investors may take a longer time to review their investment options,” Colliers stated. 

According to OCBC, the lack of Fed guidance effectively means that the earliest possible date for the initial hike is July but the June meeting remains theoretically s an option. the lack of FOMC guidance effectively means that the earliest possible date for the initial hike is July, but

“A more plausible scenario would be to use the June and July FOMC meetings to prepare markets, and for the first hike to come earliest in September and/or December (with futures market more eyeing the latter). Given the 1Q GDP growth nearly stalled at +0.2% qoq annualised, clearer signs of a growth pickup would be needed,” OCBC stated.