Is a property downturn on the horizon in Singapore?

Rental and price growth are expected to slow down next year.

A recent report from Cushman and Wakefield notes that Singapore is likely to be affected by the imminent slowing of global economic growth in 2023 due to a “rapid front-loading of US interest rates hikes, tightening monetary policies in several advanced economies, and an expected lag between monetary policy and economic activity.”

“Assuming interest rates remain high into 2023, overall property demand is expected to slow as companies adjust to the impact of heightened interest rates,” the report said.

Here’s more from Cushman and Wakefield:

A property downturn (falling prices and rents) is still not our base case, but rental and price growth is expected to slow significantly in 2023 as companies tighten their belts and consumers become more cautious. According to Moody’s analytics data, inflation is expected to ease by 2023, albeit remaining markedly higher compared to pre-pandemic levels. 

However, 10-year government bond yields are expected to remain elevated over the next few years. That said, historically interest rates tend to move in cycles. As such, this could surprise on the upside for the property market if interest rates were to fall due to a recession. 

We remain sanguine that the property market in Singapore could see resilience despite higher interest rates and slower growth, given current tight supply conditions across the board. Property rents and prices for grade A offices and prime logistics are still expected to see inflation-driven growth due to tight supply and a long-term demand for quality assets. 

Repricing opportunities, especially for prime office and logistics assets, could be limited even with rising interest rates as asset owner’s holding power remains strong and rents are largely expected to grow and support capital values. This was apparent in the last interest rate hike cycle of 2016 to 2019, when property yields continued to largely compress whilst interest rates rose. 

Nonetheless, if interest rates remain high into 2023, transaction volumes could cool as the expectation gap between buyers and sellers widens.