Will Singapore property prices continue to soar despite rising mortgage rates?

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Singapore Property Prices Poised for Continued Growth Amidst Rising Mortgage Rates

Singapore property prices are expected to continue their upward trajectory for the time being, as analysts suggest that current increases in mortgage rates are unlikely to significantly dampen demand for both public and private housing. The median rates for two-year and three-year mortgage loans have risen from approximately 1.5 per cent at the start of the year to over 2.6 per cent, with fixed rates for two-year packages at DBS and OCBC reaching 2.75 per cent and 2.98 per cent respectively. However, these figures are not yet considered a substantial deterrent to buyers.
Mortgage Rate Hikes Yet to Significantly Impact Demand

Experts indicate that the current escalation in mortgage interest rates has not substantially affected overall housing demand. While rising rates may temper buyers' expectations regarding the type of property they can afford and the loan amounts they can secure, they are not seen as a major obstacle for genuine homebuyers. The loan quantum for most public housing flats is not excessively high, and a significant portion of homeowners are not over-leveraged, allowing them to continue servicing their existing loans.
The 3 Per Cent Threshold as a Key Indicator

Analysts believe that the impact of rising mortgage rates will become more pronounced once they surpass the 3 per cent mark. This threshold is considered critical because the Total Debt Servicing Ratio (TDSR) for property loans currently uses a 3.5 per cent interest rate for computation, suggesting a buffer exists before monthly mortgage obligations significantly strain borrowers' incomes. The TDSR itself was reduced from 60 per cent to 55 per cent in December, meaning total monthly loan payments cannot exceed this percentage of gross income.
Potential Shifts in Buyer Behaviour Above 3 Per Cent

Should interest rates climb significantly, particularly beyond the 3 per cent level, some shifts in buyer behaviour are anticipated. First-time borrowers might consider HDB loans, which are pegged at a lower rate of 2.6 per cent, or opt to pay down existing loans to reduce monthly installments. Furthermore, some prospective buyers who were initially considering private properties might pivot to more affordable resale flats. Buyers are expected to become more cautious with their spending and calculations once interest rates exceed 5 per cent, though those with a genuine need for a home are still anticipated to be able to afford one within this range.
Robust Market Projections for the Remainder of the Year

Looking ahead, analysts maintain a positive outlook for both property prices and the market. The resale public housing market is projected to see between 25,000 and 28,000 transactions this year, with prices increasing by 7 to 10 per cent compared to 2021. The launch of more Build-To-Order (BTO) flats is expected to help regulate price growth in the resale market. For private residential properties, prices are forecast to rise by 6 to 9 per cent in 2022, with 9,000 to 10,000 units transacted. The resale private market anticipates a price increase of 6 to 8 per cent, with 11,000 to 13,000 homes sold. Singapore's strong economic performance and high employment rate are seen as factors that can cushion homeowners from global economic uncertainties, reinforcing the country's property market as a stable investment haven.

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Will Singapore property prices continue to soar despite rising mortgage rates?

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