Rate hike not always bad for office capital values

Singapore

WITH the impending interest rate hike later this year, there has been much concern over the adverse impact on office capital values.

Since the start of the Quantitative Easing (QE) by the US Federal Reserve in December 2008, the Urban Redevelopment Authority (URA) office property price index (PPI) has been up 43 per cent, thanks to the strong capital flows into Asia and the ultra-low interest rate environment which makes borrowing much cheaper.

According to real estate database provider Real Capital Analytics, capital inflows into Asia real estate rose from US$25.2 trillion in 2009 to US$54.9 trillion in 2014, growing at a compound annual growth rate of 16.9 per cent.

Given the increased demand from investors seeking higher returns, property markets in Asia have been on a multi-year boom, with prices in many gateway cities surpassing th…