Historical Returns on the Singapore Real Estate Market During Interest Rate Increases

Historical Returns on the Singapore Real Estate Market During Interest Rate Increases

It makes sense that real estate agents, buyers, and sellers are interested in what the recent increase in US interest rates implies for the immediate future of the housing market.

First interest rate increase since 2018 on March 16, 2022

Therefore, it is appropriate that we, at NAVIS research (yours really), look back in time to consider instances in history where similar events have occurred. And these are what I discovered.

Based on similar past events, we can see that the Singapore real estate market has generally continued to rise in the time measured after the first Federal Reserve rate hike.

In each of the eight occurrences, the market has rallied in 75% of the cases throughout the course of the subsequent 3, 6, and 12 months.

I do not currently believe it is important to make projections longer than a year, as unforeseen global events may cause results to diverge even more.

Although the Fed has signaled the possibility of six additional rate increases in 2022, in my opinion, this is unlikely given the recent jumps in oil and commodity prices brought on by COVID and shortages caused by the Ukraine-Russia war.

Why?

The threat posed by the deadly combination of high interest rates and inflation is too large for the finally strengthening global economy.

Furthermore, it took ten years for interest rates to even reach the 2% level after the most recent major global financial crisis in 2008, which was substantially less severe than COVID. This is because the economy needs cheaper liquidity for a longer period of time than anticipated.

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As a result, I continue to believe that low interest rates will continue for a very long time, despite the fact that it will be impossible for the ruling class to accept this because doing so will just fuel the debate over the unpopular topic of high inflation rates.

I think the Fed is hoping to avoid overly bullish company expenditure, market valuations, and asset price bubbles from bursting into the next probable economic catastrophe by preventing the market from aggressive higher rate hikes.

In conclusion, even though historical probabilities still favour an optimistic outlook on the real estate market as the global economy regains its footing and "Live With Covid" becomes a way of life, history does not always anticipate the future.

About The Authors

With over two decades of experience in the industry, the couple Mortgage-Bankers-turned-Realtors, Jan Tan and Leonard Cheah have been providing valuable and unbiased solutions to Home Owners & Seekers.

With a fusion expertise on real estate and mortgages, Property Bankers have helped their clients to make informed decisions that aligns with their unique needs and financial capabilities.

Their approach is transparent as they provide all the necessary information and support to help our clients navigate the complex and ever-changing real estate market. Trust them to be your guide in your real estate journey. Contact them today for a one-time free 30-min consultation.