Rising interest rates push buyers out of the resale market

In July, condo resale volume dropped 6.7% MoM.

Buyers are moving out of the condo resale market, and rising interest rates are one to blame, said property experts.

As per Huttons, the 3-month SORA increased by 0.5% in July, whilst the fixed rate loan interest exceeded 3%.

The interest rate movements coupled with a 1.2% increase in resale prices in July was what led to a drop in transactions for the month, said Huttons. 

This was echoed by OrangeTee, adding that there is a mismatch in price expectations between buyers and sellers.

"As overall prices have already risen for 24 consecutive months, which is quite a long time, and there are rising uncertainties surrounding the global economies and increasing interest rates, some buyers may not be willing to match some sellers' asking prices. On the other hand, sellers have no pressure to cut prices," OrangeTee said.

OrangeTee, alongside PropNex Realty and One Global Group, said that apart from interest rates, the resale price growth is also being driven by demand from HDB upgraders.

Whilst HDB upgrades contributed to the price growth in the condo resale market, demand from this group will also support the resale market for the rest of the year, according to Huttons and PropNex Realty.

In the near term, One Global Group said resale volumes will likely move slower in August due to Hungry Ghost festivities.

"We can expect buyers to likely gravitate towards more affordable options in the resale market to broaden their selection of homes due to the new benchmark prices established by new launch properties in the suburban region and the choppy state of interest rates," the expert said.