Falling Interest Rates Will Cause Property Prices to Rise – Fact or Myth?

With interest rates spiking in recent months, homeowners have been feeling the heat with a significant increase in their monthly mortgage repayments.

Of even greater interest to many is the impact it will have on property prices.

Let’s take a quick look at the relationship between the 3-month Singapore Overnight Rate Average (SORA) and URA All Property Price Index from 2019 Q1 to 2023 Q4.

The orange line representing SORA displays a complete variety of movements, downtrend, uptrends, plateau, you have it all.

On the other hand, the URA PPI exhibits a consistent upward trend throughout the entire period, from 2019 Q1 to 2023 Q4. Even as interest rates fluctuated, the property prices seemed to follow a more consistent and upward trajectory.

Based on this observation, it appears that the fluctuations in interest rates have not had a substantial impact on property prices in Singapore.

Naturally, the next question will be – if interest rates do not impact property prices in Singapore, what then are the factors that impact property prices? To shed some light on this, we simply have to remember that Singapore has a peculiarity most thriving, developed countries do not have. Singapore has extremely limited land but is also one of the countries with the highest Gross Domestic Product Index (GDP), which indicates a robust economy, not just within the country itself, but in relation to other countries globally. Hence, the role interest rates play in Singapore’s real estate becomes greatly diminished next to factors such as demand and supply dynamics, economic conditions, government policies, and investor sentiment.

If interest rates help us foresee future property prices, what then can we use as our crystal balls? Well this will require a separate discussion altogether. Speak to our professional to gain more insights and updates about Singapore’s exciting property market!

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All information is provided “as is”, with no guarantee of completeness, and accuracy. In no event will Portfolio and/or salespersons thereof be liable in contract or in tort, to any party for any decision made or action taken in reliance on the information in this article or for any direct, indirect, consequential, special or similar damages.

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