The re-election of Donald Trump as President of the United States in November has sent ripples through global markets, reigniting debates on trade tensions and monetary policies. These developments, coupled with the Federal Reserve's recent interest rate cuts, have sparked discussions about their possible effects on economies globally. For Singapore, a city-state deeply entrenched in global trade and finance, the implications on the property market are significant.

While some uncertainties have lingered, the interconnectedness of global events and local real estate trends offers both challenges and opportunities for buyers, homeowners, and investors alike. Let's examine how recent current affairs are shaping Singapore's property landscape and what lies ahead.

The COVID-19 pandemic is a clear example of how current affairs can shape Singapore's property market. The unprecedented global event tested the resilience of economies and property markets worldwide, including our little island. In early 2020, as the world grappled with lockdowns and economic uncertainty, Singapore's property market faced its own challenges. Transaction volumes dipped sharply during the "circuit breaker" period in Q2 2020, with fewer than 1,000 private homes sold - one of the lowest quarterly figures in years.

Despite these initial setbacks, the property market rebounded strongly by late 2020, thanks to a combination of factors:

1. Pent-up demand: Buyers who held off purchases during the lockdown rushed back into the market once restrictions eased.

2. Government support measures: Wage subsidies, rental reliefs, financial aids, and cooling measures were implemented to help stabilise households and businesses, preventing widespread defaults.

3. Shift in priorities: With work-from-home and remote working becoming the new norm, many sought larger homes or properties in quieter locations, such as mass-market condominiums, driving demand for private residences and suburban HDB flats.

Do read if there is still value to ulu HDBs here.

Private Property Price During COVID Period (2019-2022)

The pandemic highlighted the property market's ability to adapt and recover from global shocks. By early 2021, property prices had not only stabilised but were climbing steadily, culminating in record-breaking number of million-dollar HDB and private housing transactions by mid-2022. This resilience offers a template for understanding how external shocks, such as trade tensions or interest rate shifts, might similarly impact the market today.

Geopolitical tensions, such as the ongoing Russia-Ukraine war, US-China trade rivalry, and the Israel-Hamas conflict continue to cast long shadows on global markets. For Singapore, a trade-dependent and financially integrated economy, these developments have nuanced effects on its real estate landscape.

Trump's renewed focus on tariffs and trade restrictions has once again brought the US-China trade relationship into the spotlight. These policies threaten to disrupt international supply chains, a scenario reminiscent of 2018-2019 when Singapore's GDP growth slowed from 3.5% to a mere 0.7%. With exports forming the backbone of Singapore's economy, such disruptions could ripple through industries like electronics, manufacturing, and logistics.

As these industries are significant contributors to employment and economic growth, a slowdown could affect consumer confidence, leading to a cautious approach towards large investments, including property purchases. Businesses reliant on global trade may scale back operations, reducing demand for commercial and industrial real estate. Similarly, households facing economic uncertainty might hold back on upgrading to private properties or investing in second homes.

Commercial and Industrial Property Prices

Despite these headwinds, Singapore continues to shine as a safe haven for global capital. Its political stability, transparent legal system, and strategic location make it a preferred destination for investors seeking refuge during volatile times.

Despite the significant increase in the ABSD to 60% for foreign buyers in April 2023, the CCR remains an area of foreign interest for select groups of buyers. While the higher ABSD has led to a drop in foreign transactions - from 5% of non-landed private resale transactions in January 2023 to 1.1% by October 2023, some nationalities continue to see value in investing in this prime property region.

Source: The Straits Times

For example, US buyers have shown notable interest, accounting for 56% of the 64 CCR non-landed property transactions recorded in the second quarter of 2024. This is because US citizens, alongside Switzerland, Norway, Liechtenstein, and Iceland PRs and citizens, receive the same ABSD rates as Singapore Citizens due to Free Trade Agreements with Singapore.

Private Non-Landed Property Prices (CCR, RCR, OCR)

In fact, during the early phases of the Russia-Ukraine conflict in 2022, Singapore experienced a significant uptick in both private non-landed and HDB property transactions, as compared to the COVID pandemic in 2019, highlighting the city-state's resilience as a destination of choice for those looking to park their wealth securely.

HDB Property Prices (CCR, RCR, OCR)

The Federal Reserve's decision to cut interest rates by 50 basis points in September marked a significant shift in global monetary policy. With the US moving towards monetary easing, the impact on Singapore was immediate, as local banks adjusted mortgage rates downward to stay competitive. The Monetary Authority of Singapore (MAS), while not setting interest rates directly, typically sees local borrowing costs influenced by global financial trends.

Lower interest rates spell good news for Singapore's property market. Reduced borrowing costs have made housing loans more affordable, encouraging homebuyers to revisit purchase plans. Let us compare last year's (2023) interest rate versus the latest rate.

In Singapore, home loan interest rates experienced significant fluctuations in 2023. The 3-month SORA, a common benchmark for mortgage rates, reached approximately 3.61%. A $1 million home loan at that interest rate over 25 years would typically result in a monthly repayment of $5,065.

Mortgage repayment at 3.61%

As of November 2024, mortgage rates have declined. The 3-month SORA has decreased to around 3.4932%. Consequently, banks are offering more competitive home loan packages. For instance, fixed-rate home loans are available at rates as low as 2.4% for both private properties and HDB flats.

Mortgage repayment at 3.4932%

Mortgage repayment at 2.4%

That being said, before you jump into conclusion that fixed-rate home loans are better, which is technically true for now, here are the key differences between the two:

While the current interest rate might not sound that much of a difference from 2023, it can already encourage more homeowners to explore refinancing options. With the Fed signalling their intention to further lower rates in the coming years, one can expect better financing options in the future.

Source: The Straits TImes

Additionally, private property markets are likely to benefit. Lower rates not only reduce the cost of financing but also improve overall affordability for first-time buyers and HDB upgraders.

The confluence of global trade tensions and monetary policy shifts has left Singapore's real market in a delicate balance. While risks remain, opportunities abound for those prepared to act strategically.

Risks

Economic uncertainties stemming from trade disruptions could slow job creation and erode consumer sentiment. In such a scenario, residential property prices might face downward pressure, particularly in less sought-after locations or property types. Additionally, cautious sentiment may lead to delayed purchase decisions, reducing transaction volumes in the short term.

Opportunities

Lower interest rates are a bright spot, offering homeowners and investors a chance to capitalise on reduced borrowing costs. For those with sufficient holding power, economic slowdowns often present opportunities to secure properties at more attractive prices. In the luxury segment, Singapore's reputation as a safe haven remains intact, with global investors continuing to seek high-value properties.

As we move towards 2025, Singapore's real estate market will continue to be shaped by the interplay of global and local factors. While trade tensions and economic uncertainties may pose challenges, the current environment of low interest rates and Singapore's position as a trusted investment hub could provide a strong foundation for sustained demand.

For prospective buyers, now might be an opportune time to consider upgrading or entering the private property market, particularly given the favourable financing conditions. Investors, on the other hand, should watch for opportunities in segments that are traditionally resilient, such as prime residential properties and well-located commercial spaces.

The waves of change triggered by global events are undoubtedly shaping Singapore's property market, creating an environment that demands adaptability and informed decision-making. With so many mixed signals, it is crucial to identify the true leading and lagging indicators of the market. Speaking with a seasoned expert and attending one of our Consumer Empowerment Seminars (CES) can provide the clarity needed to navigate these complexities.

Views expressed in this article belong to the writer(s) and do not reflect PropNex's position.