In Focus
RESIDENTIAL PROPERTY | Staff Reporter, Singapore

This is what developers really think of rising interest rates

Steeper funding costs aren't that scary.

Property developers in Singapore are afraid that rising borrowing costs will adversely affect property sales prices and volumes, according to the latest Real Estate Sentiment Index (RESI) by the Real Estate Developers’ Association of Singapore (REDAS) and the National University of Singapore (NUS).

The survey showed that 54.1% of developers believe that higher interest rates will cause a decline in REIT stock performance, 46.7% believe that steeper funding costs will lead to an increase in property foreclosures and loan defaults.

Another 46.7% believe that higher credit costs will have a moderate impact on new property sales prices, while 47.5% say that higher interest rates will lead to a drop in new property sales volume.

Despite this, developers remain fairly confident that the 25 bp rate hike will not create a substantial negative impact on Singapore’s property market.

One respondent said that the marginal hike is not significant at the moment, but may become an issue in future if mortgage rates rise substantially.

Another added that the increase was relatively small and should not have a huge impact in the market, adding that what would really impact sales would be a a restructuring in the jobs market.

Developers are also positive that the rise in interest rates will not substantially impact land bidding prices. Interest in new land sales will also be undented by rate hikes, the survey showed.

“The minimal increase in interest rates is not expected to create substantial negative impact. This has been factored into property price and demand,” one respondent said.

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