Singapore's real estate industry has long been a key pillar of its economy, providing jobs and contributing significantly to its GDP. But rising interest rates are expected to harm the housing market.

Although interest rates have been historically low for some time, they are rising as the global economy recovers from COVID-19 pandemic. US Federal Reserve chairman Jerome Powell has promised to bring the inflation down to 2 percent by consecutive interest rate hike. The real estate market in Singapore is anticipated to be widely impacted by this increase in interest rates.

Potential Impact of Rising Interest Rates on Homeowners and Buyers

One of the most apparent impacts of rising interest rates would be that borrowing costs for purchasing properties would increase, making it more challenging for some buyers to afford homes. This situation could slow down the real estate market as demand wanes, leading to a fall in property prices.

Homeowners who bought homes when interest rates were low would be especially vulnerable, as their disposable income may not be sufficient to cover the sharp increase in monthly mortgage payment at a higher rate.

This could increase the number of mortgage defaults and foreclosures, leading to further property price declines.

Impact of Higher Interest Rates on Developers

The increase in borrowing rates may potentially have a detrimental impact on investors and developers. 

If developers are already heavily leveraged, it may be difficult for them to finance new projects or collective sales, which would slow down new buildings and reduce the supply of new homes. 

This, in turn, could drive up property prices in the short term.

Rising interest rates could cause a decline in the value of an investor's real estate holdings, making it harder to provide the same profits as in the past.

Strategies for Managing Increased Costs from Rising Interest Rates

Anyone with personal loan or home loans will feel the effects of a rise in interest rates as the cost of borrowing money tends to go up. Here are some ways you can counter the interest rate hikes:

1. Refinance your home loans: If you have a fixed-rate home loan with a high-interest rate, refinancing to a new loan with a lower rate may be an option. In the long run, this could assist in lowering your monthly mortgage payments and save you money.
2. Partial prepayments: Pay a lump sum to your bank and reduce your mortgage loan quantum so you will pay less interest to them. Some financial instituions allow up to 50% prepayments at no penalty.
3. Use cash: Consider paying for purchases upfront instead of taking on debt. This can help you avoid paying interest charges altogether.
4. Negotiate for lower interest rates with your lenders. Be prepared to shop around and compare rates from multiple lenders.

Conclusion: Strategies for Adapting to a Changing Market

For homeowners, buyers, and property developers alike, understanding how interest rate changes can impact real estate is essential for successful investments. As interest ratesando continue to rise across Singapore, it's important for real estate industry players to remain agile and adjust their strategies accordingly in order to protect their profits and maintain profitability in this rapidly changing market.

Financial prudence is key so you should buy a house that you can afford in good and bad times.