Private residential prices may increase even after new cooling measures

It may grow between 9% and 11% this year.

The price of private residential properties may continue to grow even after the imposition of new cooling measures, with prices projected to rise between 9% to 11% in 2022, according to a report by OrangeTee & Tie.

Around 21,500 to 23,000 private homes excluding executive condominiums are expected to be sold in 2022.

For 2023, the price growth will range from 5% to 8%, with sales volume expected between 19,000 to 25,000.

READ MORE: Private residential prices rise 3.8 YoY in Q3: URA

OrangeTee noted that the rapidly increasing interest rates and heightened geopolitical tensions and recessionary risks are causing investors to lose confidence in equities and riskier assets, with some preferring to invest in properties that are regarded as a “safe-haven asset or a hedge against inflation.”

Strong household balance sheets and the tight domestic labour market and sustained income growth will boost housing demand, whilst some buyers may purchase homes before interest rates continue to increase.

It added that rate hikes from the Fed may not ease, and if interest rates reach 4%, the interest rate that is used for the total debt servicing ratio may be revised to around 4.5% in 2023. This could affect more buyers and drag housing demand.

“For investors and landlords, surging rents are still cushioning the impact of higher mortgage payments now,” OrangeTee said. 

“If mortgage rates continue to soar and competition stiffens with more home completions next year, some landlords may face difficulty coping with the higher mortgage loans. The situation may worsen when property tax and cost of living increase further,” it added.