Increasing Risks On Singapore Properties Investments – MAS Warns Households
The Monetary Authority of Singapore warned the households to carefully review their investments in Singapore properties and corporate bonds due to the present uncertainties in the economy. The latest review regarding the country’s financial stabilities include a report on low interest rates, increasing political issues, and slow growth on investments which has huge impact on the country’s global financial stability.
MAS released statements to warn property investors as the risks on rental income emerge. Currently, issues like declining rentals, continuous increase of interest rates, and an increasing report on vacancies may all signify that rental incomes may not be able to pay the investor’s property loans. In addition to this, monetary fluctuations and unstable foreign economies could have an impact on the returns of their investments overseas.
Companies facing debts could have difficulties in paying their obligations due to increased rates of interest yet very slow growth of investments. This is particularly true for those who rely on their bonds. Oil and shipping companies have recently faced problems in paying their debts, MAS added. Despite of this, the regulator mentioned that bonds will most likely withstand the economic instabilities, where 1.5 percent of corporate bonds are composed of defaulted bonds. MAS also gave an assurance that interest rates and the sluggish income growth will not make a huge impact on most companies.
Singapore is currently pursuing structural transformation which will cater more in services than manufacturing. This will add the challenges on the investors’ side, according to economist Michael Wan of Credit Suisse.
Progress growth has been sluggish for the past few months amid the hardships. Singapore will continue to strive hard in 2017 for structural transformation, as mentioned by Mr. Wan.
Despite of the uncertainties in the economy, the authority reported that most households in the country will survive the income shock and labour crisis due to “ample financial buffer.” Yet, MAS released warning statements to households that the sluggish economy might cause them to encounter difficulties in paying their home loans, especially if the investments were initially higher when they acquired it. Thus, it is very critical for households to seriously plan their retirements as well as the risks when purchasing Singapore property, MAS added.
The authority also noted that most households were able to take for granted their retirement expenses, according to a survey conducted by HSBC last year. MAS suggested that households can consider monetizing their properties to increase their retirement income. Among the many options may include moving to a smaller home by availing the Silver Housing Bonus, taking up the Lease Buyback Scheme from the Housing Board, and placing their properties for rent.