SINGAPORE – Moves by central banks around the world to raise interest rates to tame inflation are already fuelling sharp downturns in housing markets as buyers turn cautious in the wake of costlier mortgages.
Research consultancy Capital Economics said house prices will fall by 20 per cent in Canada and New Zealand, by 15 per cent in Australia and by 10 to 15 per cent in Sweden – all nations that have experienced interest rate rises of late.
It expects price falls will be more moderate elsewhere – at between 5 and 10 per cent in Britain and 5 per cent in the United States.
A similar story is playing out in Singapore, where two-year, fixed-rate mortgages have gone up as much as 0.73 percentage point to 2.98 per cent within two months.
The Singapore property market has been resilient so far, with prices for private homes and Housing Board resale flats growing at a faster pace in the second quarter than in the first.
Urban Redevelopment Authority flash estimates showed the private residential property index rose for the ninth straight quarter – up 3.2 per cent from the first to the second quarter after a 0.7 per cent lift from the last quarter of 2021 to the first three months of this year.
Data also showed demand remained robust with new home sales hitting a six-month high in May although some estate agents say activity has slowed a little.
Mr Gary Seah, associate group division director at PropNex Realty, noted that customers have definitely become more cautious but prices remain supported by home-occupier demand.
“Six months ago, you put up for sale, and it is taken up immediately. Now, you put up for sale, you still can breathe before it is gone,” Mr Seah said.
He added that home-occupiers will still buy if the property has attributes such as being new, in a good location, near to good schools and boasting a nice view.
Many of these buyers also have made a bit of money from the sale of their previous home and so are willing to pay more, Mr Seah said.
One of his recent deals involved a couple selling their HDB flat and buying a condo. The couple paid $50,000 to $60,000 more than what was paid for another unit in the same condo development two to three months ago.
A relative shortage of supply is also playing a part in market dynamics.
The number of unsold private residential units has been on a downtrend since the peak in unsold units in the first quarter of 2019.
Mr Leonard Tay, head of research at Knight Frank Singapore, said the tight supply of saleable inventory, coupled with resilient underlying demand, is providing some support to private property prices.
Industry observers said the suburbs – known as the outside central region – will see the biggest demand or price gains.
The hike in borrowing rates means monthly mortgage payments become more expensive, which will in turn gravitate buyers towards more affordable properties in these areas.
Ms Catherine He, head of research for Singapore at Colliers, thinks upcoming mass-market launches like Sceneca Residences in Tanah Merah and AMO Residences in Ang Mo Kio will attract genuine home buyers and support prices.
Mr Eugene Lim, key executive officer of ERA Realty, said HDB upgraders will also be a big force driving demand in mass-market properties.
Mr Lim said around 31,000 HDB flats will reach their minimum occupation period (MOP) this year.
The MOP is usually for a period of five years, after which an owner can sell or rent it out or buy a private property.
Mr Lim noted that there will be a base of 31,000 upgraders looking for a private property in the mass market.
HDB resale prices have also been buoyant, giving upgraders more leeway to splurge on their first private property.
Flash estimates for the HDB Resale Price Index showed that flat prices rose 2.6 per cent from the first to the second quarter.
There were also 31 HDB flats that sold for $1 million or more last month, up from 30 in May.
Mr Pow Ying Khuan, head of research at 99.co, said 166 flats were sold for at least a million dollars in the first half of this year, a 57 per cent increase from the 106 sold in the same period last year.
PropNex’s Mr Seah said some buyers of these million-dollar units are downgraders who sold landed or private properties but their HDB flat must be in a good location, with nice views and still have a long remaining lease.
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