Singapore's property developer stocks have taken a considerable hit due to the surge in interest rates. So far this year, all indices encompassing the local property sector are showing negative returns.

Notable industry giants, City Developments (CDL), CapitaLand Investment, Frasers Property and UOL have seen substantial declines in their share price.

We highlight their year to date (YTD) returns in Singapore Exchange (SGX) at the close of October 20.

These dismal figures can be attributed to the prevailing high inflationary environment, which has led to increased borrowing costs for developers, subsequently exerting downward pressure on asset prices.

Banks are charging interest rate of 5 to 6 per cent for their loans to some property developers with high gearing.

Moreover, the profits from overseas projects may be adversely affected due to the strong Singapore dollar currency which MAS use to manage inflation. 

External factors have also come into play, with China's manufacturing sector experiencing a slowdown, resulting in reduced materials output and a simultaneous increase in production costs.

Developers face rising development costs from the construction companies since the migrant workers' wages and dormitories rent have increased.

The geopolitical tensions from Russia vs Ukraine war and Israel vs Palestine war are adding to uncertainties.

In this climate of "rising mortgage rates" and anticipation of a sluggish economic outlook, Singapore property buyers may be grappling with concerns about affordability. As a consequence, many are contemplating delaying their property purchase or upgrading decisions.

Foreigners are reluctant to buy residential properties in Singapore else they must pay a massive 60 per cent Additional Buyer Stamp Duty (ABSD). 

It is expected that the growth of the local residential property market will remain "subdued" due to a combination of property cooling measures, macroeconomic challenges, and a surplus of new housing supply which will TOP in 2024 and 2025