Blocks of condominiums in Singapore. The rising value of borrowing is unlikely to have a significant influence on Singapore’s property market, analysts informed CNBC.
Ore Huiying | Bloomberg | Getty Images
SINGAPORE — The rising value of borrowing is unlikely to have a significant influence on Singapore’s property market, analysts informed CNBC.
That’s due to a number of components akin to rich patrons, robust rental demand and foreigners shifting to Singapore.
Singapore’s actual property market is backed by wealth, in keeping with Christine Li, head of Asia-Pacific analysis at Knight Frank. That means it is much like markets akin to Shanghai and Beijing, the place lots of people purchase properties with a small mortgage or with out borrowing in any respect, she informed CNBC over the telephone.
Countries like Australia and New Zealand have a distinct dynamic, she added. In these markets, “people buy their homes because of income growth, so when interest rates start to hike, you can see that the reaction … is a lot more immediate.”
Fixed house mortgage rates from Singapore’s main banks have climbed as excessive as 3.85%, according to local media reports.
But in wealth-backed markets like Singapore, interest rates do not “move the needle,” Li stated, “because these people in the first place don’t even rely on borrowing to fund these homes.”
One property agent informed CNBC final year that all-cash presents had been on the rise at the moment.
Interest rates are “not going to be a determining factor for prices to come down,” Li stated. “I think you need something that is a lot stronger, especially from the macro side, for people to realize that entering a market at this kind of price level may not give them the returns they want.”
Christine Sun, senior vice chairman of analysis and analytics at OrangeTee and Tie, stated patrons within the prime wealth bracket in Singapore have sufficient money to fund their home purchases, or can redeploy capital to pay for his or her loans.
“Foreign investors may continue to buy properties here as they consider our mortgage rates to be lower than other countries and our strong Sing dollar can help preserve the value of their investment,” she stated.
However, it doesn’t suggest the residential property market ignores rising rates and looming dangers, stated Alan Cheong, government director of analysis and consultancy at Savills.
There are different components inflicting costs to proceed “powering on,” seemingly defiant of financial logic, he added.
Private residential property costs are nonetheless on an upward development, and elevated 3.4% within the third quarter this year in comparison with the earlier quarter, in keeping with flash data from the Urban Redevelopment Authority of Singapore.
Demand for housing can also be supported by robust family steadiness sheets and sustained revenue progress, Sun stated.
New measures introduced by the government a few weeks ago will possible have a dampening impact on the market however they are going to be short-term, analysts stated.
The measures embrace tighter limits on loans and a 15-month wait-out interval for sure non-public householders who wish to downgrade to public residences.
That wait-out interval might have an effect on sales of public flats, which in flip, might trigger a pull again in demand for suburban condos, stated Sun from OrangeTee.
“However, past trends indicate that our property market is highly resilient and usually rebounds within six months of a cooling measure,” she stated.
Cheong stated intervention by the federal government has not been overly restrictive nor has it run forward of the demand curve.
“All it did was to disorientate the potential market participants into deferring their purchase,” he stated, including that patrons would finally re-enter the market “with a vengeance,” main to a different spherical of property cooling measures.
On the availability facet, there’s normally a lag when demand rises, Cheong stated. That means costs shall be sticky, and even improve as demand returns.
Real property costs are anticipated to proceed growing, although at a slower tempo than in 2021, Sun stated.
“We estimate that overall private home prices will still rise 7-9% this year,” she stated.
Knight Frank’s Li stated robust progress in rents might enhance sentiment within the general market, and assist demand from each buyers and people who purchase properties to stay in.
“From owner occupiers, I think the low unemployment rate and also the relocations of a lot of expatriates … these people may be able to support the residential market either from the rental front or from the pricing front,” she added.