Historical Singapore Property Market Returns During Interest Rate Hikes

Updated: Mar 21


Do the starting hikes in interest rates mean the doom of real estate investments?
Do the starting hikes in interest rates mean the doom of real estate investments?

It's been a long while since I wrote as I've been soooo busy with so much!


Just to inform my blog readers too, I have moved to Huttons in Sept 2021 with the bulk of NAVIS realtors following us since then.


I am very grateful for the many agents whom have followed us as frankly, I was not expecting much given that changes in environment are always uncomfortable for most people.


Anyway, our migration was a major exercise as more than 1000 agents followed us and there were many obstacles and challenges along the way we had to overcome.


However, it was a necessary and critical move for several long term strategic reasons and I must say, 6 months into Huttons now, the move is a breath of much needed fresh air and we are very happy to have found a near perfect synergy between what NAVIS needed and what Huttons provides.

 

Historical Singapore Real Estate Market Returns During Interest Rate Hikes


On to our subject proper, with the recent 1st interest rate hike in the US, it is natural that real estate investors, agents and home owners are curious about what that means in the near term for the property market.


what happens to real estate market when interest rates hike
16 March 2022 - 1st Interest rate hike since 2018

Hence, it is apt that we, at NAVIS research (Yours truly), dive deep into the past to take a look at historical periods where similar events has happened.


And these are my findings.



Based on events of a similar nature in the past, we can observe that in the majority of periods measured after the 1st Federal Reserve Rate Hike, the Singapore property market has continued rallying.


To be precise, in all 8 events, 75% of the time the market has rallied in the following 3, 6 and 12 months periods. 


At present moment, I do not think it is necessary to project beyond 12 months as global events that come up along the way may further deviate outcomes.


Although the Fed has indicated 6 more potential rate hikes in 2022, it is my opinion is that it may not ultimately happen as we are concurrently facing oil and commodities price spikes in recent months due to COVID and Ukraine-Russia war triggered shortages.


Why?

The lethal cocktail of high interest rates and inflation poses too much of a threat to the finally recovering greater economy. 

Furthermore, in the most recent major Global Financial Crisis in 2008 which was significantly minor relative to COVID, it took 10 years before interest rates even climbed back to the 2% mark as the economy needed cheaper liquidity for much longer than projected.


Interest rates property market singapore
Notice the interest rates between 2008 to 2018

Therefore, I maintain the view that low interest rates are here to stay for much longer although it will not be possible for the powers that be to acknowledge this, as it will only fan the flames of discussion for an unpopular issue - high inflation rates.


I believe that the Fed hopes that by pre-empting the market of aggressive further rate hikes, it can cool over-optimistic business spending, market valuations and prevent asset price bubbles from ballooning into the next potential economic disaster.


To summarise, while the past does not necessarily predict the future, historical probabilities still favour a bullish view on the property market as the global economy gets back its footing and "Live With Covid" becomes a way of life.

 

I am thankful to the many of you who have reached out to me for consultations in the recent months but as my commitments pile up, these days, I am not able to take on all consultations personally.


However, I have many proteges who are equally, if not more, capable of guiding you on property investments if you would like a non-pushy, data driven and higher level insights approach to your upgrading or investment journey.


My team of realtors are trained in the following expertise and will be glad to advise you.

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