Residential property prices to climb by 7% in 2022: report

This will be driven by the flight to the safety of real estate amidst inflation.

Residential property prices could rise by 7% year-on-year in 2022 as the industry serves as a hedge against inflation and the shrinking inventory of unsold stock, Savills reported. 

Despite the higher rates of Additional Buyer’s Stamp Duty, Savills said the zero-COVID policy implemented by China and the war between Ukraine and Russia has led to increases in commodity price that made investing in residential real estate more attractive.

“With global infl ation expected to persist for the rest of 2022, the yearning to hedge against it using residential properties will remain strong, despite expectations that interest rates are expected to rise further,” Savills noted in its May 2022 Singapore residential sales report.

“The other reason why the market has so far been immune to hitherto and expected rate hikes is that the Total Debt Servicing Ratio had used a notional 3.5% mortgage rate to compute mortgage quantum and tenure.”

Between January 2021 and the May 2022, the one-month and three-month compounded Singapore Overnight Off er Rate rose by just 0.5% and 0.29% to 0.75% and 0.46%, respectively. Effectively, mortgagors  pay around 1.5% to 1.6%. For two to three-year fi xed rates, it is about 2.2% to 2.6%, which is still a wide gap from the 3.5% TDSR rate.