If you have investment properties in Malaysia where housing loan rate at about 5% and high vacancy rate, you will understand the meaning of negative yield. Even if the property is tenanted, after deducting all expenses like taxes and maintenance/repairs, you are paying your tenant to stay at your place.
Let's define YIELD. Yield should be based on the current estimated value of your property and not the historical costs which could be 10-20 years ago. Or perhaps your acquisition costs (include all taxes and duties) if it is higher.
Now, the market is reading US rate hike of 4-6 times within the next 12 months. This is very very scary if you are a borrower.
Let say rate hike of 2% within the next 12 months for Singapore housing loan, which will bring the housing mortgage rate to almost 4-4.5%. Most of the gross yield now is about 3-3.5% or even less if the acquisition cost is high.
So, after deducting all expenses, property tax, maintenance (getting higher), repair, commission etc, the net yield is likely to be in negative.
If that happen, if investors counting on rental income to pay off the monthly instalments would be facing difficulties in serving the loan even with lower LTV.
I am not sharing something that would not happen, but it is highly likely if interest rate is going up.
Next, Singapore has very high export value. The impact of trade war on Singapore cannot be under-estimated. The consequences of trade war, is the possible and potential job loss and economy downturn.
My point is... think twice before you jump.
Dunno why I share so much these few days... just perhaps, contribute two cents worth of view