Oct 7, 2011 

Standard & Poor’s (S&P) has labelled Singapore’s property sector “underweight”, noting that the private property market can anticipate a correction of five to 10 percent.

The major supporting factor lies in the low interest rates, which permits affordable mortgage and positive carry, said Lee Wee Sieng, analyst for S&P Capital IQ Equity Research (Asia).

He said that more people could be lured to property, considering the low interest rates offered by banks in respect to inflation rates. Likewise, low loan rates may result in new home purchases, given the higher returns from property leasing.

“Mortgage is still very affordable, with positive carry and negative real interest rate. And we don't see interest rate going up for the next two or three years,” said Lee.

Property prices are at a peak due to a combination of positive factors, including Singapore’s gross domestic product (GDP) and low unemployment rates. These, in turn, have elevated the average household income.

The GDP in 2010 expanded by 14.5 percent, even with an unemployment rate of 2.2 percent.

The financial services company predicts that the country can expect growth of between 4.3 and 4.8 percent throughout 2011, lower than the original projection of 4.5 to five percent, implying that recession will likely be short and shallow, with Q4 seeing an upward rally.

Info courtesy - PropertyGuru.com.sg