Higher-for-longer interest rates will hurt demand for Singapore homes

IN RAPIDLY ageing Singapore, many may welcome the rise in interest rates. A retiree who lives on passive income may find the higher returns on Singapore dollar fixed deposits or Treasury bills helpful in coping with the rising cost of living.

Higher interest rates are generally a bane to real estate players, though. Developers face higher financing costs, which hurt profitability, while those with high gearing could run into cash flow difficulties.

Landlords face a double whammy of higher financing costs reducing net income, and falling property valuations due to the use of higher discount rates to value projected future cash flows.