Singapore’s housing affordability will improve in 2022 after worsening in 2021, amid rising household incomes, slowing property price gains and slightly increasing, but still low, interest rates, according to Moody’s Investors Service in a new report. This means the share of household income Singaporean borrowers need to meet monthly home loan repayments for a typical new mortgage will decline in 2022.
“Better housing affordability in 2022 is a credit positive for Singapore’s covered bonds. We expect household incomes to recover, which will underpin improving housing affordability. Property prices and interest rates will rise slightly, but not enough to outweigh the positive impact of rising incomes on housing affordability,” says Daniel Gan, a Moody’s Analyst.
Moody’s forecasts Singapore’s economy will grow 4.0% in 2022, while unemployment will be low at 2.6% for the year, which will support broad wage increases and higher household incomes.
Housing affordability in Singapore worsened in 2021 because of rising property prices and declining household incomes. Meanwhile, Singapore's residential property market will cool over 2022 because of recent real estate tax increases, tighter mortgage lending regulations and higher stamp duties for purchasers.
Still, residential property prices will continue to increase given solid demand and improving household incomes, but at a slower pace than last year's strong gains.
At the same time, mortgage interest rates in Singapore will rise slightly in 2022 from low levels, as the global economic recovery takes hold and central banks in advanced economies start to
Normalize monetary policy.
Mortgage interest rates in Singapore will still be accommodative after slight rises this year, given that they dropped significantly over the first half of 2020 and stayed low thereafter.