The impact of inflation on real estate has been said to be positive given that property is often touted as a hedge against it. So long as economic growth remains positive, which based on the Ministry of Trade and Industry’s forecast for 2022 of 3% to 5%, the performance of our real estate market will be dictated by these two variables. In this Asian Cities Report, we take a helicopter view of how inflation and the attendant rise in interest rates could affect three key real estate sectors. To begin, it is the twin effects of the interest rate policies of the major central banks in combating inflation and the level of inflation, which will impact the real estate market here. However, on the interest rate front, its impact on various sectors will vary. Graph 1 shows the heightened inflationary expectations of the G7 economies, China and Singapore. Graph 2 highlights where rates are at the time of writing. 

Hitherto, expectations of inflation have been confined to mainly 2022 which implies that we have a stepping up of prices this year, a climbdown in 2023 followed by a resumption of normal price increases thereafter. This could partially explain why interest rates are expected to peak in 2023. We will briefly look at how the office, retail and private residential sectors will react to both interest rates and inflation over the remainder of 2022.