Rising interest rates, property prices to drag housing affordability: report

Gradual household income gains are not sufficient to offset these hikes. 

The increasing interest rates and property prices will worsen housing affordability in Singapore in the next 12 months, Moody’s Investors Service reported. 

“Worsening housing affordability is credit negative for Singapore covered bonds because it will increase risks for new mortgages in covered bond pools,” the report read in part. 

In August, first-time buyers of private residential properties needed 19.4% of their average monthly household disposable income to meet the monthly mortgage repayments on new loans. This is up from 17.3% in December 2021.

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This will likely affect the affordability of residential properties as the gradual income gains of households may not be sufficient to offset increases in interest rates and property prices. 

Moody’s noted that mortgage interest rates in Singapore will likely “continue to rise significantly through the middle of next year.” 

This comes as it expects central banks in advanced economies to tighten their monetary policy aggressively to ease inflation. 

In addition, property price is expected to continue increasing, albeit gradually, in the next 12 months. This will be driven by the low supply of real estate and a modest increase in household income.