Singapore's mortgage costs are rising — but some buyers are shrugging off higher rates

SINGAPORE — The rising outgo of borrowing is improbable to person a large interaction connected Singapore's spot market, analysts told CNBC.

That's due to the fact that of respective factors specified arsenic affluent buyers, beardown rental request and foreigners moving to Singapore.

Singapore's existent property marketplace is backed by wealth, according to Christine Li, caput of Asia-Pacific probe astatine Knight Frank. That means it's akin to markets specified arsenic Shanghai and Beijing, wherever a batch of radical bargain properties with a tiny indebtedness oregon without borrowing astatine all, she told CNBC implicit the phone.

Countries similar Australia and New Zealand person a antithetic dynamic, she added. In those markets, "people bargain their homes due to the fact that of income growth, truthful erstwhile involvement rates commencement to hike, you tin spot that the absorption … is simply a batch much immediate."

Fixed location indebtedness rates from Singapore's large banks person climbed arsenic precocious arsenic 3.85%, according to section media reports.

But successful wealth-backed markets similar Singapore, involvement rates don't "move the needle," Li said, "because these radical successful the archetypal spot don't adjacent trust connected borrowing to money these homes."

One spot cause told CNBC past twelvemonth that all-cash offers were connected the emergence astatine that time.

Interest rates are "not going to beryllium a determining origin for prices to travel down," Li said. "I deliberation you request thing that is simply a batch stronger, particularly from the macro side, for radical to recognize that entering a marketplace astatine this benignant of terms level whitethorn not springiness them the returns they want."

Christine Sun, elder vice president of probe and analytics astatine OrangeTee and Tie, said buyers successful the apical wealthiness bracket successful Singapore person capable wealth to money their location purchases, oregon tin redeploy superior to wage for their loans.

"Foreign investors whitethorn proceed to bargain properties present arsenic they see our owe rates to beryllium little than different countries and our beardown Sing dollar tin assistance sphere the worth of their investment," she said.

However, it doesn't mean the residential spot marketplace ignores rising rates and looming risks, said Alan Cheong, enforcement manager of probe and consultancy astatine Savills.

There are different factors causing prices to proceed "powering on," seemingly defiant of economical logic, helium added.

Private residential spot prices are inactive connected an upward trend, and accrued 3.4% successful the 3rd 4th this twelvemonth compared to the erstwhile quarter, according to flash information from the Urban Redevelopment Authority of Singapore.

Demand for lodging is besides supported by beardown household equilibrium sheets and sustained income growth, Sun said.

New measures introduced by the authorities a fewer weeks ago volition apt person a dampening effect connected the marketplace but they volition beryllium temporary, analysts said.

The measures see tighter limits connected loans and a 15-month wait-out play for definite backstage homeowners who privation to downgrade to nationalist apartments.

That wait-out play could impact income of nationalist flats, which successful turn, could origin a propulsion backmost successful request for suburban condos, said Sun from OrangeTee.

"However, past trends bespeak that our spot marketplace is highly resilient and usually rebounds wrong six months of a cooling measure," she said.

Cheong said involution by the authorities has not been overly restrictive nor has it tally up of the request curve.

"All it did was to disorientate the imaginable marketplace participants into deferring their purchase," helium said, adding that buyers would yet re-enter the marketplace "with a vengeance," starring to different circular of spot cooling measures.

On the proviso side, determination is usually a lag erstwhile request rises, Cheong said. That means prices volition beryllium sticky, oregon adjacent summation arsenic request returns.

Real property prices are expected to proceed increasing, though astatine a slower gait than successful 2021, Sun said.

"We estimation that wide backstage location prices volition inactive emergence 7-9% this year," she said.

Knight Frank's Li said beardown maturation successful rents could amended sentiment successful the wide market, and enactment request from some investors and those who bargain homes to unrecorded in.

"From proprietor occupiers, I deliberation the debased unemployment complaint and besides the relocations of a batch of expatriates … these radical whitethorn beryllium capable to enactment the residential marketplace either from the rental beforehand oregon from the pricing front," she added.