Home prices headed for steepest drop since 2001 as interest rates spike

The SIBOR has more than doubled this year.

Rising borrowing costs and a weaker currency bode ill for Singapore’s home prices amid their longest slide in more than a decade, according to a report by Bloomberg.

The three-month Singapore interbank offered rate has more than doubled in a year to the highest since 2008. The main benchmark for housing loans is seen rising further as it narrows the gap with the swap offer rate, a measure of borrowing costs influenced mainly by exchange-rate expectations. The spread reached the widest since 2009 as the Singapore dollar slumped 7 percent this year.

“If the Sibor catches up with the SOR in the next three to six months, that premium may be eroded and we will get further softening in property prices,” said Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd. “Buyers are going to factor in rate increases, so a further price correction is difficult to avoid.”

Read the full report here.