What to expect from Singapore’s real estate investment sales market

Investment sales might be stymied for the rest of the year.

According to a report from Savills, although interest rates have fallen dramatically in Singapore, with the all in borrowing cost for good quality borrowers coming down to levels matching commercial yields, macro uncertainties are still trajected up and this has withheld investment decision making for investors.

The report added: “To partially address the uncertainties, we ran a Monte Carlo simulation on the tariff rates on Singapore. The graph below shows the output after 1,000 simulations. Each major tick mark on the line is the mean tariff for that quarter from the implementation of the tariffs (April 2025). As of the date of this writing, we are now in period 2.”

Here’s more from Savills:

Using this negotiation model, we would expect the tariffs to halve in 3 years’ time. Although the rates are expected to fall, it is the length of time taken for it to reach a trivial level that is of concern. Nevertheless, its impact on the various sectors of real estate in Singapore may be less conformed to the likely response for the sectors in most parts of the world.

While the tariffs would reroute trade flows and may ignite inflation in the short to medium term, over time, if they remain, it may slow the velocity of transactions and in turn may dampen inflation. Interest rates may therefore stay sticky for a while or could even rise, but as global economies slow, inflation could recede and interest rates fall further from current levels.

The all in borrowing costs in Singapore dollars for borrowers with good credit rating is presently around the low 3% level. This is comparable to the yield for commercial properties and is below that for retail and industrial real estate.

Given that supply for these sectors of the property market here ranges from tight to moderate, yields may still hold up, especially for prime real estate. With these fundamentals in force, it may be easier for the transaction market to return to life than if they had been negatively out of synch with borrowing costs.

For now, the uncertainty levels are still high and each response from the US could ruffle feathers further. It may take another quarter or two for the real estate investor market to get adapted to the tact of the US administration and this may stymie investment sales for the rest of the year. We maintain our full year forecast of S$20 billion.

Simulation of US Tariff Rates on Singapore