Global interest rate driving HDB resale flat price?

It was reported that resale flat prices could rise beyond sustainable levels because of global low interest rates [1]. Only citizens and PRs can buy resale flats, there is no way global investors can take advantage of low interest rates to buy resale flats and drive their prices up. PR numbers are determined by the government, not by interest rates. Furthermore, only a family unit or a single above 35 can buy resale flats and can only buy one flat unit so there is no way Singaporeans or PRs can take advantage of low interest rates to hoard up resale flats and drive their prices up. Recent laws that prevent private property owners from buying resale flats further restrict resale flat buyers to those in genuine need of a place to stay. Singaporean or PR families are unlikely to be primarily motivated by interest rates in their decision to buy a resale flat. Flat price and COV are probably more important consideration factors. It has become fashionable to blame any kind of property price rise to low global interest rates. But in the case of HDB resale flats, because of the numerous restrictions put in place, it is unlikely that low global interest rates will be the key determining factor. More likely than not, it is the acute imbalance between demand and supply that is the key force driving price up.

[1] Straits Times, ‘Not out of the woods yet’ on resale flat prices, 16 Oct 2012
THE property market shows signs of stabilising, but “we are not out of the woods yet” when it comes to the rise of resale flat prices, said National Development Minister Khaw Boon yesterday.
He warned that prices could “rise beyond sustainable levels” because the global environment of low interest rates looks set to continue, owing to monetary expansion in the US and Europe.


2 Responses to “Global interest rate driving HDB resale flat price?”

  1. Jim Says:

    Some valid points there however you have to also consider that since most of the banks’ interest rate is so low now, Singaporeans/PRs will buy a second flat for investment hence affecting the demand and supply. All you need is 4 out of 10 family unit to buy a second flat to drive up sales by 40%.

    • trulysingapore Says:

      Dear Jim, you write as though you have not read the article. How do Singaporeans/RPs buy a second flat when they are restricted by law to only one? If you analyse this problem purely through economic theory without considering the practical aspects of the situation, you are not going to get to the right conclusion.

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