Weekly Outlook7.25

Traders' Opinions

Summary:

In the 4 hour timeframe, we could confirm that a possible bullish upswing is highly probable following a break and retest on the daily level and multiple break of structures.

Gold has finally seen its best performance yet since the middle of June after rising by an ample 1%. We could also attribute this rise to a weaker US Dollar following a slump on treasury yields last week. However, this does not mean that the general trend for XAUUSD has finally halted--as the market may just be waiting for the Fed’s 75-basis point rate hike seen to happen this Wednesday.

Going to the Weekly charts, Gold has been on a 5-week-losing-streak against the dollar. Price has violated 3 weekly key levels--indicating that the bears are in full control. However, last week was an exception as price has finally printed a green candle in response to the key level found on the $1680 level. Our team is expecting for gold to waddle between the range of $1680 to $1760--obeying the resistance and fibonacci retracement of 38.2%.

Zooming into the Daily Timeframe, Gold is hovering in a daily key level. However, it is very likely that it will zoom past that level as its higher time frame objective is to reach $1760 at minimum.

In the 4 hour timeframe, we could confirm that a possible bullish upswing is highly probable following a break and retest on the daily level and multiple break of structures. Furthermore, it is important to note that the bounce is supported by a weekly key level which generally provides strong momentum--however, price may encounter a bit of turbulence along the way as it is set to bump through a 4 hour key level.

As a summary, our team is flagging posisble bullish intent for the week before it would proceed with the general trend.

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Thomas

Chakradhar Chemicals, a medium-sized company that manufactures micronutrient and soluble fertilisers and farm equipment, has braved a lot so far this year. A surge in the cost of imported raw materials – metals and plastic – and a plummeting rupee slashed its profit margins drastically.

But when asked if there is a panic now that the rupee stands at the threshold of 80 to a dollar, and may soon fall further, Managing Director Neeraj Kedia says he isn't losing sleep over it.

The calm is not unfounded. Raw material prices have normalised, and a similar depreciation in the currencies of his trade partner China have helped offset the hit to his business from the rupee's fall.

Kedia says if the rupee falls further in the coming days, he may have to compromise on profit margins for a few months, but the long-term impact on his business will be negligible.

"Unless it falls to 85-a-dollar levels… then we will be in trouble," he says.

The rupee has fallen rapidly to 79.97 a dollar – from 77.64 at the end of May and 74.55 on February 23, a day before Russia invaded Ukraine. It has already tested a record low of 80.0575 twice this week, recovering when the Reserve Bank of India stepped in to support it.

Kedia says that while a drop of 1.5 rupees in the last two months sounds like a lot, in percentage terms it is only 2 to 3 percent and, while that pressures his margins for some months, he expects things to stabilise after that.

"I don't see a reason to raise my blood pressure over this," he said, adding, "As such, a 1 to 2 percent fluctuation keeps happening in businesses. Even if I get my components from Mumbai or Chennai [instead of importing them] there could be such a fluctuation since my freight component will increase. Demand destruction will happen if there is 10 percent fluctuation."

The war waged by Russia on Ukraine, raging for four months now, has led to capital flight towards safe-haven assets in the US, leading to a fall in most global currencies.

To make matters worse, a global shortage in the supply of commodities produced by Ukraine and the heavily sanctioned Russia has sent inflation spiralling to unprecedented levels across economies. While economies move to tighten loose monetary policies employed during the pandemic, to rein in inflation, concerns about the onset of a recession have led to a further flight to secure U.S. assets.

Receding dollar liquidity in the face of aggressive tightening by the U.S. Federal Reserve and risk aversion made the dollar stronger, leading to sharp depreciation in most global currencies. Earlier this month the euro touched parity with the dollar and even fell below for the first time in 20 years.

A fall in India's currency not only raises the bill for importers of the country but further feeds into domestic prices by way of imported inflation. In India's case, surging oil prices and a falling rupee proved a lethal combination for the country's inflation situation given the country imports most of its oil.

As a result, the more than 7 percent fall in the rupee this year has affected importers such as Kedia as much as it has Indians who have seen a sharp rise in their expenditure, even on basic necessities.

The Indian Rupee Touched Record Lows, But Not Everyone Is Worried_1

The rise in food and fuel prices has led to burgeoning household bills – 32 percent of Indian households are struggling to meet monthly expenditures and 11 percent are unable to, Indian media reported last week citing a report by Kantar Group. About 71 percent of people surveyed feel inflation will continue to rise.

However, India is not alone in such battles and economies across the globe find themselves grappling with a depreciating currency in the face of rising inflation. The rupee is in fact one of the better-performing currencies globally.

The rupee crossed the 70-a-dollar mark in August 2019. While a breach of another landmark round figure in three years is bound to garner attention, analysts argue that there is no need to sound the alarm yet. There is nothing sacrosanct about 80 rupees to a dollar and a fall below that psychologically crucial level may not add significantly to India's existing maladies.

Abheek Barua, chief economist and executive vice president at HDFC Bank, says a combination of a depreciating currency and high inflation no doubt pressures the economy, but a recent softening of global commodity prices has increased India's tolerance for rupee depreciation.

"It will add to some inflation pressure but the depreciation impact on inflation is not too large …The rupee is still overvalued," he said.

Inflation vs exports push

Barua points out that since the Indian currency has depreciated less than a few of its trade peers, some more depreciation, albeit in an orderly fashion, may stand to make Indian exports more competitive globally, evening out some of the trade deficit in favour of India's balance of payments.

Although it will lead to some more inflationary pressures, "the quantum of the inflation impact is relatively low and we gain competitiveness…So I don't think there is anything sacrosanct about 80," he said.

The real effective exchange rate (REER), which measures the rupee's value compared with a basket of 40 currencies, stood at 104.18 in June. In other words, the rupee is still overvalued.

While exporters have already seen windfall gains on the accounting side from the rupee's sharp fall this year, a further fall may make their products more attractive globally given that the geopolitical crisis in Europe has increased opportunities for Indian exports.

Animesh Saxena, managing director at Neetee Apparel, a small-sized manufacturing unit that exports fashion apparel, says that while his company had seen accounting gains on 20 to 30 percent of its dollar exposure, other companies had seen gains of 50 percent due to the rupee's rapid fall. The Indian Rupee Touched Record Lows, But Not Everyone Is Worried_2

The Indian Rupee Touched Record Lows, But Not Everyone Is Worried_2

Pay for imports with rupees

India's central bank, aware of the inflationary impact of a falling rupee, has been actively selling dollars in the currency market to ease the rupee's fall.

The effort led to a $61.77bln drop in its foreign exchange reserves from their peak in the first week of September.

The Reserve Bank of India has also been actively interacting with currency market participants to assuage concerns regarding a run on the currency, including emphasising that with reserves of $580.25bn, India is well prepared to defend the currency against a sudden, sharp fall.

In a slew of regulatory measures announced by the bank earlier this month in a bid to support the rupee, one stood out more than others. The central bank encouraged invoicing for Indian exports and imports in Indian rupees.

While there is still a long way to go before the rupee receives acceptance as a currency for trade, analysts say that this will certainly open up space for deeper engagement with countries with restricted use of the dollar, such as Russia.

This would be especially beneficial in deferring India's dollar outflow for its spending on oil and defence imports from the country.

"Russia is selling oil at a discounted rate to India and China. At a time when our trade deficit is under pressure, it makes every mathematical, political and logical sense to import from Russia," Harihar Krishnamoorthy, an independent expert on foreign exchange said.

If India can pay for those imports in rupees, "then we would have a huge, huge benefit to the rupee", Krishnamoorthy said.

In that scenario, the surplus rupees could either be parked in accounts that Russian banks have with Indian banks, balanced against exports such as pharmaceuticals and engineering items, or even be invested in the government bonds offsetting a portion of the losses of foreign portfolio investors that Indian markets are seeing currently.

In a scenario where India is able to replace some of its imports of oil from Saudi Arabia, where trade is dollar-denominated, with that from Russia, the import bill would reduce significantly, helping the rupee, said Harihar.

Source: Al Jazeera

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Owen Li

Singapore's key core inflation gauge jumped to the highest level in almost 14 years, boosting the case for the central bank to continue tightening monetary policy even after three moves this year.

The core inflation print, which excludes private transport and accommodation, rose by 4.4% in June from a year ago, according to a joint statement from the Monetary Authority of Singapore and the Ministry of Trade and Industry on Monday. That's the fastest since November 2008 and exceeds the median estimate in a Bloomberg survey for a 4.1% gain in prices. Faster Singapore Inflation Bolsters Case for More Tightening_1

Faster Singapore Inflation Bolsters Case for More Tightening_1

Core inflation, the key measured tracked by the MAS, is projected to peak in the third quarter, before easing toward the end of the year, according to the statement.

"The rise in core inflation reflected stronger price increases across the broad categories of services, food, retail and other goods, as well as electricity and gas," the MAS and MTI said, referring to the June number.

The data supports the Monetary Authority of Singapore's decision to tighten policy earlier this month, the third time this year, to tackle price pressures. Analysts see the inflation peak is still to come, after the central bank this month said the core measure will average between 3%-4% in 2022 from 2.5%-3.5% forecast previously.

"They would still have been surprised by how high this inflation print is," said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group, referring to monetary policy makers. "With underlying inflation pressures still very strong, we see a need for further policy tightening at the October review."

The all-items consumer price index gained 6.7%, compared with a median estimate of 6.2% in a Bloomberg survey, and 5.6% the previous month. The central bank expects the all-items measure to surge between 5%-6% this year from the earlier forecast range of 4.5%-5.5%.

Source: Bloomberg

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Devin

Britain has a chequered economic past so it is not exactly unusual for new prime ministers to take over at times of crisis. It is hard, though, to think of a premiership in recent times that has begun with the skies as dark as they are today.

Liz or Rishi? Tax cuts now or later? In a sense, it doesn't really matter because whoever takes over from Boris Johnson will be handed one heap of problems.

Harold Wilson took up the reins in 1974 when the country was on a three-day week and inflation was rife. Wilson handed over to Jim Callaghan in 1976 just as a sterling crisis was about to erupt. When Margaret Thatcher defeated Callaghan three years later, it was in the aftermath of the winter of discontent and with inflation on the rise.

Truss or Sunak will be confronted with a mix of all these problems. Inflation is high and rising. Energy bills will rise sharply for a second time this year in October. A summer of strikes has only just begun. Sterling looks vulnerable on the currency markets.

Wilson and Thatcher at least had the comfort of knowing they had a full parliamentary term to straighten things out. Truss or Sunak will not have that luxury. One or other of them will take over in midterm, with living standards crashing and not much time to impart a feelgood factor.

The economy is not exactly in recession, at least in the technical sense of experiencing two successive quarters of negative growth, but is showing all the classic signs of heading for a downturn over the coming months.

Retail sales are down almost 6% year on year. Consumer confidence is at its lowest in almost half a century. The latest purchasing managers' index last week showed manufacturing output contracting and the service sector expanding at its slowest rate since early 2021. The PMIs are not a particularly good guide to the precise state of the economy but they do provide some clues as to its direction of travel.

None of this is a surprise because real pay – wages adjusted for prices – is falling at a record pace, and the squeeze will intensify as the annual inflation rate rises from its current 9.4% to about 12% in October.

Usually, the Bank of England would respond to a weakening economy by cutting interest rates but it will do the opposite this time. Borrowing costs look set to go up by half a percentage point to 1.75% when Threadneedle Street's monetary policy committee announces its latest decision early next month. Not since the mid-1970s have interest rates gone up when the economy was in recession.

The Bank is under fire for first stoking inflation and then failing to act quickly enough when price pressures started to surface. Truss has said she wants to look at Threadneedle Street's mandate – the duty to hit the government's inflation target – to make sure it is tough enough.

But the Bank's actions need to be put in context. When the pandemic arrived in early 2020 and the country was locked down, it was right for the Bank to cut interest rates and pump money into the economy. At the time, the fear was of a second great depression.

‎Equally, before the outbreak of the war in Ukraine, it was reasonable to assume that inflationary pressures would be temporary, the result of which was largely unmanageable global factors. A year ago, there were fears that the end of the government furlough scheme would lead to a rise in unemployment. It doesn't, but the bank doesn't know that. ‎

‎The continuation of the Ukrainian battle has led to the ‎‎Bank of England‎ becoming more hawkish. Clearly the war was a classic "black swan" event: shocking and dramatic.

Attempts to dragoon the Bank into aggressive interest rate increases are unwise because the economy is in a state of extreme fragility and there is a risk of making the looming recession longer and deeper than it need be. There are signs – especially from lower commodity prices – that global price pressures are easing, which should feed through into sharply lower UK inflation next year.

For now, there is the possibility that the recession will be short and shallow. In part, that's because unemployment is below 4% and record vacancies mean there are plenty of jobs available. In part, it's because better-off households are able to live off the excess savings they accumulated while spending opportunities were limited during the various lockdowns. In part, it's because the property market has been defying gravity and owner-occupiers feel less gloomy when house prices are rising.

Clearly, that could change. Demand for labour might fall as activity weakens. Rising interest rates could be the trigger for a marked slowdown in the housing market. If people are forced to sell their homes at a discount because they have lost their jobs, then Britain will be back in the negative equity crisis of the early 1990s. For either Truss or Sunak, this is the nightmare scenario.

As the foreign secretary has correctly reminded voters, Britain's economic performance has been rotten since the Tories won the 2010 general election. Attacks on the previous Labour government for failing to mend the roof while the sun was shining ring even more hollow now than they did at the time, because Britain is ill-prepared for the testing times that are to come. Whoever wins the race for 10 Downing Street is going to have the briefest of honeymoons.

Source: The Guardian

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Kevin Du

Retail traders, responsible for the wild price swings in everything from GameStop to Revlon, have returned to another old favourite: beaten-down cryptocurrency stocks.

Over the past 10 days, they have scooped up nearly $1 billion worth of shares of cryptocurrency-exposed companies, according to a report published on Wednesday by VandaTrack. That rapid burst of buying has led to stocks including Marathon Digital Holdings, Coinbase Global and Riot Blockchain showing up among the most bought assets on Fidelity's platform this week.

"Retail traders are definitely surfacing here," said Ed Moya, senior market analyst at Oanda. "Everyone expected one last major plunge for Bitcoin and now prices are recovering and risk appetite on Wall Street is somewhat improving."

With the resurgence, the NYSE FactSet Global Blockchain Technologies Index is now on track for its largest monthly gain since February 2021.

Among its biggest gainers this month, Marathon Digital has jumped 133 per cent, while Riot Blockchain, Silvergate Capital and Coinbase have all climbed by at least 50 per cent. These stocks are still down more than 40 per cent this year.

The Bloomberg Galaxy Crypto Index, which tracks the performance of the largest digital assets including Bitcoin, has climbed roughly 35 per cent over that stretch.

And half of the 20 best-performing US ETFs since the end of June are cryptocurrency-related. However, Bitcoin is still down about 51 per cent this year.

Despite July's rebound, cryptocurrency-related companies have been among the worst-performing stocks this year as investors fled risky assets fearing that the Federal Reserve's aggressive policy-tightening regime could tip the economy into a recession.

The collapse of the TerraUSD stablecoin and subsequent folding of firms including Celsius Network and Three Arrows Capital only exacerbated these losses in recent months.

Mining stocks have taken a particularly hard beating as Bitcoin prices tumbled from a record high of almost $69,000 in November to a two-and-a-half year low of less than $18,000 last month. Bitcoin's plunge has spurred several analysts to declare a so-called "crypto winter" as roughly $2 trillion in market value was erased from the digital-token space.

Even one of the biggest influencers in the cryptocurrency space has seemingly started to get cold feet. On Wednesday, Elon Musk's Tesla revealed that it had sold off a majority of its Bitcoin holdings during the second quarter, saying the move was made to provide the electric-vehicle maker additional liquidity.

But that has not deterred some traders. With Bitcoin on track for its first monthly gain since March, the retail crowd has shown up en masse, flocking particularly to mining stocks.

The $7.4 million Viridi Bitcoin Miners ETF has jumped roughly 33 per cent this month, making it one of the top-performing US-listed exchange-traded funds in July. Stronghold Digital Mining, which is held by the ETF, surged more than 79 per cent over the same period and is on track for its best month on record.

Trading volume for the miner soared to upwards of 100 million shares on Wednesday, more than 70 per cent of its total trading volume since it went public last year, a sign of retail-investor interest.

"Whenever any stock or group breaks out of a multimonth range to the upside, the rally usually lasts several weeks," said Matt Maley, chief market strategist at Miller Tabak + Co. "It won't happen in a straight line, so they could take a breather at any time, but the line of least resistance is now up."

Source: The National News

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Alex

Aluminium producers are facing a hard landing after the bonanza pricing seen in the first half of 2022.

U.S. producer Alcoa reported an average realised price on third-party sales of $3,864 per tonne in the second quarter, compared with $2,753 in the same period of last year. Shareholders will reap the benefits of the revenue boost with a $500 million share buy-back.

Time, however, has already been called on the aluminium party.

The London Metal Exchange (LME) three-month aluminium price has collapsed from an all-time high of $4,073.50 per tonne in March to a current $2,450.00.

Fear of recession is now the dominant theme in industrial metals as surging energy prices translate into manufacturing slowdown.

High power pricing spells particular trouble for aluminium operators, given the energy-intensive nature of the smelting process. The resulting margin squeeze is already taking an increasing toll on production. Aluminium Producers Feel the Margin Pain as Price Slumps_1

Aluminium Producers Feel the Margin Pain as Price Slumps_1

European Meltdown

Hardest hit so far have been European smelters.

Western European production of primary aluminium fell by 11.5% to 1.483 million tonnes in the first half of the year, according to the International Aluminium Institute (IAI).

Annualised production has fallen below the 3.0 million level for the first time this century.

European smelters find themselves in the eye of the energy storm that has broken since Russia launched what it calls its "special military operation" in Ukraine.

Alcoa has suspended its 228,000-tonne per year Spanish plant and others are flexing run-rates as they navigate super-high-power prices.

Montenegro's smaller Podgorica smelter has also been shuttered with other Eastern European operators such as Romania's Alro Group and Slovakia's Slovalco idling capacity.

It's worth noting that production in the IAI's Eastern European category, which includes all these countries, was down by just 1.4% in the first half of the year.

The intriguing inference is that Russia's Rusal may be raising production. Its products have not been sanctioned, although Australia's ban on exports of alumina to the country has disrupted its raw material supply chain. Rusal has not released production figures for this year.

Alumina Hits

European smelter pain is now extending further upstream to alumina refining.

Romania's Alro Group, which has idled 132,500 tonnes of primary aluminium capacity, is now closing its alumina plant also due to soaring power costs.

Alcoa is reducing output at its San Ciprian refinery in Spain for the same reason. Natural gas costs have risen from around $45 per tonne of alumina produced in early 2021 to more than $215 in the second quarter of 2022, the company said.

The plant, which has an annual capacity of 1.5 million tonnes of the intermediate product, has reduced output by 15%.

There is no sign of any imminent relief from the power crunch.

The entire forward power price structure in Germany, to take just one example, has moved exponentially higher with spot pricing, posing a structural problem for any smelter without a captive power source.

U.S. Smelter powers down

The margin squeeze has spread to the United States.

Century Aluminium is idling its Hawesville smelter for "approximately nine to twelve months" after the power cost to operate the plant "more than tripled the historical average in a very short period".

Century boasts that its Kentucky facility is the largest North American producer of military-grade aluminium. Hawesville's special status played an important role in the Trump Administration's use of Section 232 national security provisions to impose import duties on primary aluminium in 2018.

Tariff protection has not been sufficient to withstand the impact of the energy hit.

Alcoa is also idling one of three lines at its Warrick smelter in Indiana, citing "operational challenges, which stem from workforce shortages in the region".

Offsetting the impact on regional supply will be the full phased return of Canada's Kitimat smelter after a protracted strike last year.

But North American aluminium production, down by 4.6% so far this year, is likely to do no more than stabilise around current low levels.

China Still Powering up

China's aluminium production is currently rebounding as smelters recover from last year's aggressive energy efficiency targets, now modified after the resulting rolling power crunch.

The country's annualised run-rate has accelerated by almost four million tonnes to 40.6 million tonnes so far this year.

Here too, though, the margin pressure is on.

The recent precipitous price collapse means that around half of China's capacity is now operating at a cash cost below the current metal price, according to AZ Global Consulting.

But don't expect immediate curtailments. China's smelters have a long history of toughing out periods of low prices with some cushioned by their relationship with regional governments.

A more likely reaction is a slowdown of new capacity coming on line.

There are signs, according to AZ Global, that investors are already growing cautious with projects slated to start this year pushed back until 2023.

Power Pinch

Availability of cheap power has always shaped the aluminium smelting landscape, but that reliance on continuous electricity to process alumina into metal is now becoming ever more acute.

It's not just the massive short-term impact of Russia's invasion of Ukraine on all fossil-fuel markets. It's also about the bigger global drive towards renewable energy, which requires massive changes in grid structure and efficiency, as Chinese smelters found out to their cost in 2021.

The longer-term headache of securing low-priced power in a structurally-challenged energy market isn't going away.

But right now, the energy crisis spreading out of Europe is already acting as a major brake on global aluminium production.

Despite China's collective ramp-up, global primary metal output was still 0.1% lower year-on-year in the first six months of 2022.

Source: Reuters

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Thomas

The recent bank hikes on mortgage rates are unlikely to dampen demand for both public and private properties unless the rates edge past 3 per cent, several property analysts said. For now, this meant that property prices will continue to soar.

They were commenting on the second quarter residential property transactions data released on Friday (July 22) by the Housing and Development Board (HDB) and Urban Redevelopment Authority (URA).

In April to June this year, there were 6,819 resale transactions for public flats, a 1.7 per cent decrease from the 6,934 transactions recorded in the previous quarter.

Meanwhile, resale prices for public homes rose 2.8 per cent from the previous quarter, which is slightly higher than the 2.6 per cent in flash estimates provided by HDB earlier this month.

The resale price index, which provides information on the general price movements in the resale public housing market, was 163.9 in the second quarter — an increase from 159.5 in the previous quarter.

As for private homes, prices rose at a quicker pace of 3.5 per cent in the second quarter of this year, five times the 0.7 per cent increase in the previous quarter.

The private residential property price index increased to 180.9 in the second quarter, up from 174.8 in the preceding three months, according to URA's data.

In general, two-year and three-year mortgage loans which carry a fixed rate have seen median rates go up from about 1.5 per cent at the start of the year to more than 2.6 per cent, according to a CNA article last month.

As of Friday, the fixed rates for two-year home loan packages at DBS bank and OCBC are 2.75 per cent and 2.98 per cent respectively

Still manageable, for now

With median mortgage rates climbing, banks and property experts earlier warned homebuyers to set aside sufficient savings as a "buffer" and to seek new loan packages or arrangements if necessary.

Despite this, Huttons Asia's senior director for research Lee Sze Teck told TODAY that he does not believe the rising interest rates on mortgages will affect demand for housing in general.

Altitude Real Estate's key executive officer Nelson Lim added that "there is always a market" for genuine buyers who need a home to live in rather than invest in.

Rising interest rates, he said, will only temper a buyer's expectations of the kind of home they can purchase and the amount of money they can borrow.

"By and large...even though there's an increase in the interest rates, it is still affordable at this point," said Lim. "So I do not see interest rates as being a very big deterrence for people buying property." Agreeing, Christine Sun, senior vice president of research and analytics at OrangeTee and Tie, said the interest rate hike has not affected the public housing resale market substantially, as the loan quantum of most HDB flats is not high, and most homeowners are not over-leveraged.

As for the private residential property market, she said most existing homeowners should be able to service their home loans now

The 3pc threshold

However, the rising interest rates offered by banks for home mortgages are more likely to be keenly felt once they edge past the 3 per cent mark, said the analysts.

Pointing out that the total debt servicing ratio (TDSR) threshold for property loans uses a stringent 3.5 per cent interest rate computation, Sun said there should be sufficient buffer for rates to move before monthly mortgage obligations exceed borrowers' gross monthly income.

This would mean that the cost of borrowing will matter more for home buyers, which could affect their decision on how much to spend on a home purchase, or whether to buy one in the first place.

The TDSR refers to the portion of a borrower's gross monthly income that goes towards repaying the monthly debt obligations, including the loan being applied for.

In a bid to cool the housing market, the TDSR was lowered from 60 per cent to 55 per cent last December. This means that a person's total monthly loan payments, including mortgage loans, cannot exceed 55 per cent of his or her total gross income.

Rising Mortgage Rates Unlikely to Dampen Property Demand in Singapore Until They Climb Above 3pc_1

Sun said should such a situation occur, more first-time borrowers may switch to an HDB loan pegged to 2.6 per cent, or paying down their loans to reduce their monthly instalment, if they are in the public housing resale market.

Wong Siew Ying, head of research and content at PropNex Realty also said that some buyers who were previously eyeing private residential properties "may decide to play it safe and opt to purchase a resale flat, which is generally more affordable compared to a private condominium.

Altitude Real Estate's Lim added that said buyers will only likely start doing their "calculations" once the interest rates go beyond 5 per cent because it will affect their disposable income.

Still, he was optimistic that those who genuinely need a home will be able to afford one if the interest rates remain within the 5 per cent range.

But they may be more restrained when it comes to picking larger-sized properties, or those on higher floors, which cost more, he said.

Strong market

Moving forward, the analysts expect both housing prices and the market to remain strong.

They projected that the number of resale flats that will be transacted this year will be between the range of 25,000 and 28,000, with resale prices for the rest of the year rising between 7 and 10 per cent from 2021.

Said Sun: "As HDB continues to launch more BTO flats in the second half of this year, the increased housing supply will continue to draw demand away from the resale market, which may help to regulate the pace of price growth and tame market exuberance."

As for the private residential properties, the analysts estimated that the prices of new homes, excluding executive condominiums, may rise by 6 to 9 per cent this year as compared with 2021, while around 9,000 to 10,000 units may be transacted.

Sun added that for the resale market, prices in the whole of 2022 may increase by between 6 and 8 per cent from the previous year, and about 11,000 to 13,000 resale homes could be sold.

"Amidst global headwinds, Singapore's robust economic growth and consistently high employment rate may help cushion homeowners from the impact of the global economic uncertainties," said Sun.

"Moreover, investors flocking to traditional save havens to preserve their capital may still park their money here as our property investment market is considered one of the safest and most stable in the world."