Property Market Historical Performance During Major Conflict Periods
Updated: Dec 28, 2022
SG Real Estate Market has a high historical correlation to the US stock market (S&P500)
Historically when the US stock market rallies, Singapore's real estate market follow 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
Historical correlation between global adverse events and the S&P500
- Study by Truist bank
In this study by a Top 10 US bank, Truist (14 feb 2022), for 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.
Singapore property market performance during major geopolitical crisis since 1990
In the major conflict events since 1990, we have seen Singapore's private non-landed market perform positively in all 5 events in the following 3, 6 and 12 months period.
This may be attributed to the classic "flight to safety investor mindset" during crises where global capital seek out safe haven assets in low political risk countries.
Our View as of 2nd March 2022
Based on past events of a similar nature, there is a higher likelihood of the stock and real estate markets moving higher in the near term after the initial knee jerk reaction subsides.
This is because risk adversity is historically short term during volatile periods.
Strong earnings in the companies forming the S&P500 means that investors monies will soon flow back into the stock market and subsequently the real estate market as present 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.
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. major conflict