By Shabnam Muzammil:
Asia is unlikely to see an asset bubble, although financial tensions could increase in the next 18 months, according to Michael Spencer, Chief Economist at Deutsche Bank.
While some of these tensions could take place as record-low interest rates start to pick up from near zero, “it would be too much to say we’re going to face serious problems”, he said.
Notably, the prolonged period of low interest rates has resulted in skyrocketing property prices despite cooling measures and household debt in the region, particularly in Singapore and Hong Kong.
Spencer addressed concerns of an asset price collapse once interest rates begin to rise on the sidelines of Deutsche Bank’s annual dbAccess Asia Conference, and noted that while “there will be pressure points”, the current situation is different from the Eurozone crisis and 1997 Asian Financial Crisis.
“The trigger this time for higher rates is not recession or falling incomes but growth.”
While it may be “popular” to say that property prices in Singapore and Hong Kong will fall once interest rates pick up, it will not be that obvious “as growth is getting stronger and income is rising”, he noted.
“To be really negative on property in these two cities, you’ve got to be far more negative on growth than we are.”
Shabnam Muzammil, Senior Journalist at PropertyGuru, wrote this story. To contact her about this or other stories email shabnam@propertyguru.com.sg
Related Stories:
Vesak Day Seminar at Sennett Residence
S’poreans outpace foreigners in private homes market
Indonesians are among top buyers of S’pore property