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Ukraine Russian War to Collapse Singapore Property Market ?

Posted by alvintay on February 25, 2022

SG Real Estate Market has a high historical correlation to the US stock market (S&P500)

War Chart 1

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As seen in the above study, historically whenever the US stock market rallies, Singapore’s real estate market follows suit between 2 to 8 quarters later (Exception during the severe 2013 cooling measures) The average of the above 5 incidences point to an average of 4.2 quarters lag between a rally in the US stock market vs the SG real estate market.

This correlation is due to:
– Signs of strength in the global economy
– Profits being cashed out of the stock market
– Diversification into lower risk assets such as real estate

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Historical correlation between global adverse events and the S&P500 – Study by Truist bank

War Chart 2
War Chart 2

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In this study by a Top 10 US bank, Truist (14 Feb 2022) the majority of time, markets shake off risk adversity and recover beyond pre-event highs within 3-12 months of a significant geo-political/military event. In the most recent significant events since 1991, all 5 out of 5 times, markets recovered above last highs within 3 months

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War Chart 3

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Based on past events of a similar nature, there is a higher likelihood of the stock market moving higher in the near term after the initial knee jerk reaction subsides. This in turn should further fuel the SG real estate market as risk adversity is historically short term during volatile periods.

Coupled with strong earnings in the companies forming the S&P500, it is likely that investors monies will soon return to the market as current record high inflation rates erodes the value of cash rapidly. The escalation of oil prices during conflict may in turn slow down the impending interest rates increase as a double whammy can result in too much ‘brakes’ applied to the economy.

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A slower rate hike is advantageous for the real estate market. Coupled with supply side shortages in Singapore’s market and rising raw material and labour costs, we remain bullish on the SG real estate market for 2022.

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