Interestingly, local interest rates remain at low levels. Overnight Sora has averaged 0.84% since the Monetary Authority tightened the S$NEER slope on Apr 14. Three-month compounded Sora which is currently at 1.04%, has been on a downtrend since January 2025 when it was at 3%.
The lower interest rates should be positive overall. “The lower rate environment and a flight-to-safety dynamic should continue to support value unlock opportunities through non-core asset sales and the potential establishment of a UOL REIT over the medium term,” JP Morgan says.
In addition, mortgage rates are typically priced at a 30 bps spread to 1-month/3-month Sora, or fixed at 1.4%-1.5%. "We anticipate residential demand will remain resilient and expect strong sales momentum at launch,” JP Morgan says.
The main risk to this positive scenario is costs. “We flag the risk that elevated construction costs, driven by fuel and material supply disruptions stemming from the Iran conflict, could moderate further development upside,” the JP Morgan report says, referring the Marina Square redevelopment, but it could apply to new developments as well.
