What is inflation? ‘Oxford Dictionary’ describes the meaning it is “the general increase in prices and fall in the purchasing value of money.” Real estate is one of the essentials in everyday life and among other items, reflected in the consumer price index. Therefore, this rising inflation indeed has and will continue to impact the cost of real estate in Singapore. Nevertheless, the property prices still continue to rise based on the latest Urban Redevelopment Authority (‘URA’) and Housing Development Board (‘HDB’) Q2 2022 releases. However, will the continuing rise in interest rates finally balance the property market demand and supply in Singapore?
Let’s look at the URA’s private Property Price Index (‘PPI’) and HDB’s Resale Price Index (‘RPI’), respectively. Private home prices surprisingly shot up from 0.7% in Q1 2022 to 3.5% in Q2 2022, whereas HDB public housing prices remain almost constant from 2.4% in Q1 2022 to 2.8% in Q2 2022.
It can be logically assumed that the respective prices are 99% accurate to reflect the supply and demand in the relevant property market sectors in Singapore for Q2 2022. What about the supply?
Think about it. Where does the supply come from? They come from either new or resale opportunities. Ever since Covid-19 entered our world, we have greatly suffered countless delays in construction, and it’s not caused due to only the pandemic. Manpower, materials shortages, and many other economic reasons. The universe seems to be acting against us in 2020 and 2021. Today in 2022, we are looking at new housing delays leading to a supply deficit that cannot satisfy the genuine property buyers in the market.
With interest rates going up day by day, will home prices finally be stable enough?
Taking a couple of references from Today’s article, Rising mortgage rates unlikely to dampen property demand until they climb above 3%: Analysts, released on 24th July 2022. I do agree to a certain extent with the analysts that it is unlikely to dampen the property demand until the interest rates have risen above 3%, as seen from historical events in Singapore. Despite this, the demand has to be transitional to the supply of the property market in Singapore too.
Remember where the supply comes from? Property transactions are a cycle, and there have to be owners who are willing to sell in the current market to restock the inventory. In the event, that such a cycle is dampened as well, it may result in an equal drop in both demand and supply leaving a similar gap; that is the situation we are experiencing.
Advice to home buyers
Needless to say, buyers are still acceptable to the interest rates now as long as it does not cross 3%. With that said, the supply shortage can still be a major factor over interest rates, especially for genuine home buyers searching in the property market.
Throughout my experience with my friends and clients in Q1 to Q2 2022, I realized that the bigger audience of buyers comes from down-graders who have sold their private and first hand home-seekers in Singapore.
I suggest sellers and buyers alike to analyze their overall financial status and portfolio before making a move or upgrade. Interest rates are bound to rise further as we face further inflation in the economy. Regardless, a move or, in this case, a downgrade is also subjective to specific audiences with a substantial portfolio of holdings, such as selling your private properties at a high market can still prove to be profitable.
Your next move
There is so much to speak about property prices, and I am also excited to learn more to have all your questions answered. I constantly sit down with my clients to lay out all housing options and routes first before starting our viewings. However, if you are confused about these options, feel free to contact me using the form below. You are always welcome to share your thoughts as well.
The growing interest rate environment will certainly impact every facet of the housing market. It’s important to remember that even if rates go above 3%, they’re still low if you consider the historical perspective.
If you’re considering buying, selling, upgrading, or downgrading, I am ready to help you get started! I have advised more than 100++ clients in the course of my career. I developed a Personalized & Systematic 5-step Advisory Process. Since then, I have constantly been updating the process to every individual needs. Click to Whatsapp me or using the floating button for an immediate response; Alternatively, Contact me via the form.