How the US–Iran War Could Affect Singapore Property Prices and Mortgage Rates

Since the US-Israel conflict with Iran started on February 28, global economic markets have faced a series of turbulence. While there are no direct implications on Singapore’s property market at this time, there are some signals that the macroeconomic factors may eventually trickle down.

It takes time for various factors like energy prices, cost inflation, and interest rate adjustments to work their way through global markets before any real impact can be felt in our real estate market.

But we can reflect on ongoing concerns raised by industry stakeholders and consumers, and after more than a month into this conflict, some pressure points are beginning to materialise. Based on how previous conflicts have negatively impacted Singapore’s property market.

The broad effects are still quite general: property prices may rise, but alongside other price increases.

This is already clear based on the pre-emptive move by the Monetary Authority of Singapore (MAS), the country’s central bank, to tighten its monetary policy stance to allow for a stronger currency in light of soaring oil prices.

The rising cost of fuel affects products from almost every industrial sector, and real estate is no exception. It will gradually be felt along the construction and related logistics chain, such as the transport of construction materials and the cost of petroleum-related products like PVC pipes and window frames.

This is a market-wide effect and not only specific to the property sector. We can expect similar price pressures to hit other industries, from F&B to electronics. So unfortunately, a fair reading of this signal to us that things look set to get more expensive.

In general, construction and development costs have consistently increased since the end of the Covid-19 pandemic, which has eroded the profit margins of nearly all developers and contractors along the value-chain.

Within the built environment sector, higher diesel and bitumen prices are becoming more relevant, as they can affect contractor margins, construction logistics, and overall development costs. While these pressures may not derail projects outright, they do make cost planning more complex and could weigh on development timelines and tender strategies if they persist, according to market analysis by SRI.

Rising property prices in Singapore in recent years have largely been driven by other factors, such as higher land costs, a robust pipeline of new launch projects, and buoyant activity in the resale market.

We need to wait and see how long this conflict drags on, and how quickly markets and supply chains can bounce back to normal.

The conflict has had a more direct and noticeable impact on the finance markets, and the posture of interest rate policies.

So far, it has put off a handful of buyers from closing deals until the volatility influencing interest rates and borrowing costs starts to settle down. Broadly, the link between the conflict and home loan interest rates comes down to higher cost inflation.

The risk of rising cost inflation could see a growing number of potential property buyers hold off on their purchases and then find themselves priced out of the property market, especially if housing prices rise faster than wage growth.

This isn’t specific to Singapore, so multiple countries’ central banks take their own measures to deal with this.

The United States Federal Reserve (the Fed) sets interest rates in the US. If the Fed decides to keep US rates high, it strengthens the US dollar and pushes up global funding costs. In Singapore, we have the Singapore Overnight Rate Average (SORA) benchmark. SORA is based on the overnight borrowing costs between banks in Singapore: it reflects the rate at which banks borrow and lend across global markets.

Most other countries don’t follow the US rates exactly – they may move up or down to a different degree, but they tend to move in the same direction.

As the conflict drags on, the issue isn’t whether interest rates will move; instead, it constrains central banks from moving them down, says Clive Chng, associate director of Redbrick Mortgage Advisory.

“Before this conflict, markets were broadly expecting the Fed to cut rates once or twice in 2026. Those expectations have been quietly shelved,” he says, adding that this comes as higher oil prices and supply chain stress across commodities have created a rapidly deteriorating inflation picture.

“With higher energy costs feeding through the system, markets are now pricing the March figure closer to 3.2–3.4%,” says Chng. The US Federal Reserve is now in a tough spot – cut too early and inflation re-accelerates; hold too long, and they risk weakening an already fragile global growth picture.

The direction and stance of US interest rates has caused knock-on effects on Singapore’s property market in the past, notably during the 2008/9 Global Financial Crisis (GFC).

SORA didn’t exist back then, but we had something similar in the form of the now-defunct Singapore Interbank Offered Rate (SIBOR) and Swap Offer Rate (SOR). In the aftermath of the GFC, the Fed instituted a Zero Interest Rate Policy (ZIRP). 

This caused home loan rates to plummet sharply, and at one point, the SOR rate even turned negative*. It was, for a time, possible to get home loan rates at one per cent; less than half the HDB Concessionary Loan rate of 2.6%.

*No, the banks didn’t start paying borrowers, as there’s a minimum repayment in the terms, but the borrowers almost certainly saw better returns from this!

This contributed to a strong rebound in Singapore’s property market, from the end of the GFC in mid-2009 to about 2013. Property prices in Singapore rose so quickly that the government stepped in with multiple rounds of property cooling measures.

The property market in 2026 is different from the one that emerged from the GFC, and measures such as the Total Debt Servicing Ratio (TDSR) and Loan To Value (LTV) caps are expected to moderate the most extreme and unexpected price spikes.

For buyers, mortgage rates are an observable side-effect of the US-Iran war.

For home buyers, construction costs and developer margins are much more distant and abstract issues compared to the reality of their mortgage payments. Interest rates affect monthly repayments, the decision whether to use a HDB or bank loan (if you’re buying public housing), eventual net gains, and maintaining your CPF balance.

Interest rates also concern landlords since higher borrowing costs will still compress net rental yields if rents don’t rise at the same pace. Note that the interest rate portion of a mortgage is tax-deductible. It’s possible that some landlords may push for higher rental rates if interest rates increase further.

This is where industry observers are starting to take a more cautious stance.

“The takeaway for borrowers: SORA-pegged rates in Singapore are heavily influenced by US rate expectations. With the Fed on hold and rate cuts pushed further out, any near-term drop in SORA, and therefore in floating mortgage rates, is looking less likely than it did at the start of the year,” says Chng.

Thus, borrowers expecting near-term mortgage rate cuts may need to temper their optimism. Amid the uncertain rate environment, borrowers should pay closer attention to the structure of their loans, rather than just focusing on the rate itself.

Chng adds that if your finances, TDSR, loan structure, and property selection are sound, a conflict thousands of kilometres away shouldn’t be the swing factor in your decision. “Timing the market around a geopolitical conflict is one of the least reliable strategies a property buyer or seller can adopt,” he says.

What can buyers do right now?

This is not the environment to blindly lock into a long fixed-rate tenure based on headline rate alone, and the flexibility embedded in your mortgage package matters more than it did six months ago.

Some of the serious questions owners and buyers need to ask themselves are: What are the lock-in period terms? What happens in year one or two? What are the refinancing / repricing options?

In general, the fundamentals that define the fundamentals of Singapore’s property market are unlikely to be compressed because of the ongoing volatility, although it has started to dampen some investment confidence.

If the property market softens slightly in the next six months, the outcome of past conflict has shown that it will be holding power and the ability to stay the course that tends to be the right move.

This brings us to another consideration regarding the US-Iran conflict and the hope of lower property prices.

Should you wait and see if property prices drop due to the war?

In May 2025, we wrote an article precisely on this issue, although it certainly wasn’t textured by expectations of a new conflict erupting. In that article, we noted that property prices do tend to drop immediately following a crisis. However, we also showed how quickly prices tend to rebound in the aftermath of said crisis. 

For example, during the Asian Financial Crisis (from 1997 to 1998), the downturn lasted only around 10 quarters, before a robust recovery period. This was followed by several recessions from 2000 to 2004, driven by the crash of the dot-com bubble, 9/11, and SARS in Asia.

Even with these multiple crises, property prices in Singapore fell for 16 quarters before rebounding toward an even higher peak in 2008. The GFC saw an even shorter period of correction: prices declined for about five quarters between 2008 and 2009, before surging strongly from 2009 to 2013. On average, prices climbed by over 50% to reach a new high.

The Covid-19 pandemic is the most recent black swan event, and there was only a relatively brief downturn in 2020 followed by a consistent increase in average property prices in Singapore from 2021 until 2025.

In all these instances, the period when prices really dipped was relatively short, and each recovery hit a higher peak price than the previous one. This highlights a very real risk of trying to time the property market.

You don’t know when the dip will come, you have a very slim window to act when it does, and waiting too long can leave you priced out. There’s also a psychological hurdle that’s often overlooked: price dips tend to occur at the height of uncertainty, when job security, income stability, and confidence can be at all-time lows. It takes a contrarian and unusual mindset to be comfortable with big purchases in such an environment.

The US–Iran conflict will likely introduce short-term uncertainty into the property market through higher costs and possibly elevated interest rates.

While the conflict has generated cautious sentiment to creep into some segments of the real estate market, a cautious posture does not necessarily mean paralysis, says Mohan Sandrasegeran, head of Research & Data Analytics at SRI.

“In Singapore, housing demand continues to be largely supported by genuine owner occupier demand, stable household formation and a transparent regulatory framework,” he says, adding that it is unlikely the market will react in the same way as more speculative markets.

The recent sales performance in the new launch market also indicates that demand has not tapered but has become more calibrated, says Sandrasegeran. And despite a higher volume of new supply introduced in 1Q2026, new project launches have continued to be absorbed at a steady pace.

Prevailing price trends also point towards a more balanced market environment rather than one that is overheating, with the latest flash estimates on the private residential market in 1Q2026 showing that private home prices rose by about 0.3% q-o-q in 1Q2026, moderating from the 0.6% q-o-q increase measured in the previous quarter.

“This suggests that while demand remains intact, price growth is becoming more measured, supported by improved supply visibility,” says Sandrasegeran, and adds that the continued ramp up in the GLS pipeline is helping to anchor supply, moderate excessive price movements and support transaction momentum.

If the conflict persists, what could it mean for Singapore’s economy and property market?

But if past cycles are any guide, a wait-and-see approach may not pay off. Periods of price weakness have historically been brief, and the subsequent recovery tends to be both swift and strong.

Most market analysts say that if the conflict persists, the immediate impact will be higher inflation and slower economic growth in Singapore as higher energy and raw material costs weigh on economic activity.

Cost pressures will also start to be more acutely felt by households and businesses, potentially dampening sentiment and delaying some spending and investment decisions, says Sandrasegeran.

History tells us that in each of the previous crises faced, the structural factors that underpin Singapore’s property market, such as land scarcity, stable rule of law, and strong household balance sheets, tend to reassert themselves within one to two years, says Chng.

The Russia-Ukraine conflict is the most recent useful comparison. When that war began in early 2022, oil spiked, inflation surged globally, and the Fed began its most aggressive hiking cycle in decades.

Chng notes that SORA climbed sharply and Singapore property prices, which many expected to fall, largely held and in some segments continued rising through much of 2022 before moderating.

The difference now is that Singapore has a direct LNG supply dependency on Qatar, which sits squarely in the affected zone. “That’s a more acute energy vulnerability than what we faced in 2022,” says Chng.

He says that what might be repeated is a short-term cooling in transaction activity as buyers take a “wait-and-see” stance, particularly in the higher-end segment where buyers have the luxury of patience.

On the property market, the continued ramp-up in the GLS programme remains an important stabilising factor, says Sandrasegeran. “A more visible and better distributed supply pipeline helps moderate the risk of excessive price acceleration over the longer term, even if short-term construction costs remain firm”.

For now, the practical approach is to stay grounded in fundamentals: understand your loan structure and ensure that the property can be a long-term home – just in case you end up having to hold for longer than expected. Wider macroeconomic events can shake the market, but they rarely constitute an emergency for disciplined and rational home buyers.