Agence France Presse reports that Singapore’s residential property prices rose by 10% in 2006 and that rents have risen by a truly extraordinary 100% in 2007 so far. That rentals are increasing steeply is confirmed by other sources (http://lushhome.wordpress.com/2007/04/) and there is evidence to suggest that the government is just as surprised at the change as everyone else appears to be. However, we’ve found no confirmation of AFP’s 100% increase statistic, yet. Data to hand suggests that rental yields have normally been in the region of 3.5% maximum for a number of years.
Given that interest rates on savings in Singapore are less than 1% pa (www.singstat.gov.sg/Keystats/mqstats/ess/essa51.pdf ), property would still seem to be an attractive investment but, as borrowing rates are considerably higher (prime lending rate is 5.33%), any kind of gearing for property investments would be heavily dependent upon prices of assets rising to be economic.
Mortgage rates are lower with fixed rate mortgages available at 3.75% and floating rate ones available at 3.4% (with even more favourable terms for one to three year terms. With the increase rental yields in the first half of 2007 the economics of property investment in Singapore are seeing a sea-change.