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The impact of an active rental resale market emerges
Dec 24, 2022
The impact of an active rental resale market emerges Singapore
By   Internet
  • City News
  • Rental market
  • resale market
  • property market
Abstract: The impact of a new round of real estate cooling measures and rising mortgage interest rates saw the resale prices of non-owned private homes in China fall 0.7% in October, the first time since November 2020 that they have fallen on a year-over-year basis.

Market participants estimate that the impact of the continued rise in mortgage rates may begin to show up in the mortgage-forced sales market in the second quarter of next year, when the number of homes that cannot afford to repay their mortgages and are forced into foreclosure may increase.


The rental and resale market is active to bring support, this year in the auction market mortgage forced to sell (mortgagee sale) the number of homes than the same period last year significantly reduced by more than 40%.


Market participants estimate that the impact of the continued rise in mortgage rates may begin to show up in the mortgage sale market in the second quarter of next year, and that the number of homes that cannot afford to pay their mortgages and are forced to sell at auction may increase by then.


According to data provided to the Union-Tribune by real estate brokerage SRI, a total of 78 homes were forced to sell in the first 10 months of this year, a remarkable 45 percent fewer than the 141 homes sold in the same period last year.


Among them, a total of 19 were successfully sold, more than 16 in the same period last year, and the total transaction amount of $51.98 million was 25% higher than the same period last year.


Analysts pointed out that most home buyers and investors have not yet been affected by the rise in interest rates, as their mortgages are still fixed-rate mortgages previously obtained at lower rates.


In addition, these two years, the rental and resale market is active, homeowners can use the rent to support the mortgage; even if they can not afford the mortgage, they can also find buyers in the open market, not to fall into the house by the bank to repossess the auction.

Edmund Tie, director of auctions and sales for Edmund Tie Industries (Edmund Tie), said in an interview, "With the active rental market after the coronary epidemic and the relatively strong market for new projects and resales launched by developers, the number of homes being forced to sell by foreclosure this year appears to be much less compared to last year."


While there have been concerns about rising interest rates in the last two or three months, the full impact has not yet been felt.


She noted that banks typically work with homeowners in financial distress to figure out how to solve their problems, and only as a last resort will they issue an ultimatum to take back their homes.


Even in financial distress, homeowners are now benefiting from an active rental market, using rents to support the increase in mortgage rates.


What's more, most homeowners had already locked in rates for their three-year mortgages before the recent high interest rate hike," said Zi-Ping Chen. As a result, we do not expect a panic sell-off in the housing market in the near term."


In an interview, SRI Managing Partner Seth Mok said, "While homeowners who overfinance are certainly feeling the pinch in the current environment of rising interest rates, it remains to be seen how this will affect homeowners over the next two or three quarters."


She noted that because of the active real estate market over the past two years, homeowners were able to easily offload their homes before they were unable to pay their mortgages to the point that the bank repossessed them. That's why nearly 45 percent fewer homes were forced to sell with mortgages in the first 10 months of the year.


Most analysts believe that the market will not show the negative impact of high interest rates until the second quarter of next year at the earliest.


Interviewed by Knight Frank's head of research, Wei-Ming Cheng pointed out that market experts are divided on when interest rates will stabilize, but higher interest rates mean higher mortgage rates for homebuyers, affecting their ability to afford their homes. They also have less money to borrow today.


The government tightened mortgage rules in a new round of cooling measures announced in late September, raising the medium-term interest rate used to calculate the total debt service ratio (TDSR) and monthly mortgage repayment ratio (MSR) by 0.5 percentage points to 4 percent.


Chan noted that homeowners are expected to be unable to repay their loans in the coming months, especially those with variable-rate mortgages, or whose mortgages mature within those two years and are expected to refinance at higher loan rates.


"It will take several months for banks to repossess homes, and we expect more mortgage-forced sales to come on the market in the second half of next year, or as early as the second quarter of next year."


The impact of interest rate hikes on forced mortgage sales will be more pronounced in 2023," said Moses. It's too early to draw any conclusions."

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The impact of an active rental resale market emerges
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