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War and Uncertainty: Should I Still Invest In Properties?

2022 has been a year full of nerve-wracking news, shocking happenings and many more - the pandemic has no signs of coming to an end with the ever-changing variants that continuously threaten our population, and we now have news of wars tearing up the globe. To be fair, there have always been skirmishes and geopolitical conflicts across different parts of the world. However, when Russia invaded Ukraine in February 2022, what followed was a massive wave of skyrocketing commodities and energy across the whole of Europe that very quickly spread across the rest of the countries.

It didn’t take long before we felt the effects in Singapore, where the volatility sent shocks across our markets and cause our inflation to soar as well. With Singapore’s economy this reliant on external factors, there were a lot of concerns about whether if this climate of uncertainty would affect the viability of investments.

Are properties resilient against external shocks?

Well, for starters, the nature of properties is quite different from stocks and equity. Properties are tangible big-ticket items that are much more resilient against overseas aggression.

Source: URA, ERA Research & Consulting

Based on our research, stocks and equity are much more reliant on external factors and saw large fluctuations, especially during times of war, spotting sharp declines over the years. However, property prices have always maintained an upward trend. As you can see from the analysis above, property prices has continued its steady climb even with the various conflicts that has been ignited over the years.

Source: URA, ERA Research & Consulting

During periods of war and aggression, we also observed the volume of property transactions going up at an average of 17% per year, which is a strong indicator that many people may turn to property in times of uncertainty.

Singapore markets: During a period of uncertainty, what happens to property prices?

For the most part, many of the property investors are wondering if the continued acts of Russian aggression will induce an extended economic recession, which might put pressure on property prices to drop. As such, many people might be encouraged to put a halt on their property purchase plans to “wait and see” first.

However, we think otherwise. As we have previously shared, the property price increase has been mainly due to a few reasons:

  • Low supply in the pipeline for new launches

  • Sharp increase in construction manpower costs and material prices, forcing developers to readjust property prices to take into account rise in building costs

  • Depleting land supply, leading a fiercer developer’s bids for land that drives up the property prices as well

Due to the continued increase in construction and manpower costs, developers are unlikely to budge even with the continued economic uncertainty. With lower supply in the pipeline, resale market will also not see notable drop in prices too. While there might be a slower rate of movement or transactions in the short term, there will not be a fall in property prices anytime soon.

Knowing how to manage property investment or home purchasing risks can be difficult, especially if you don’t have the most up-to-date market information. If you need guidance and help from someone with the right experience and knowledge, reach out to us to find our more.


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