Housing affordability to slightly worsen as prices increase: Moody’s                   

However, it will remain “sound”  as low interest rates will counter the impact of the price increases. 

Housing affordability will slightly worsen, but will remain sound over 2021 to 2022 as low interest rates offset the impact of rising property prices, Moody’s Investors Service said.

"Private residential property prices in Singapore will further increase over the next 18 months supported by strong demand. However, the government has signaled that it will impose cooling measures if house prices soar, potentially curbing growth over the rest of 2021 and 2022 compared with 2020," siad Dipanshu Rustagi, a Moody's Assistant Vice President and Analyst.

Sound housing affordability will also support the credit quality of loans in covered bond mortgage pools, Moody’s said.

It also said that Singapore’s mortgage interests will remain low for the rest of the year, following the “accommodative monetary policy” stance of major advanced economies. However, interest rates will slightly pick up in 2022 as the global economy  recovers.

“As a result, housing affordability – the share of household income borrowers need to meet monthly home loan repayments for a typical new mortgage in Singapore – will worsen slightly over the next 12-18 months but stay low,” it said.

Moody’s also noted that Singapore’s household income will remain stable for the rest of the year and 2022 which shows economic and job market recovery, and the unemployment rate declined to 2.7% in June from 3.5% in September 2020, but still remains above pre-pandemic levels due to the disruption in some sectors such as aviation and hospitality.