(Jan 3): Singapore's home prices grew at a slower pace in the fourth quarter, as buyers were pinched by surging borrowing costs.

Prices climbed 0.2% according to flash estimates released by the Urban Redevelopment Authority on Tuesday (Jan 3). That’s the lowest quarterly increase for 2022.

Tight supply dented home sales, which fell to the lowest in eight years in November. Despite the slowdown in growth, Singapore’s housing sector remains bullish. A shortage in supply and an influx of wealth have pushed up prices in the city state competing to become Asia’s leading financial hub.

“Strong employment sustains sellers’ pricing power, and they may not be inclined to lower prices too excessively,” said Christine Sun, the senior vice-president of research and analytics at OrangeTee & Tie, adding that demand remains strong and prices are likely to go up next year.

Home prices are projected to climb 5% to 8% in 2023, Sun said, adding that the supply of houses will ramp up in 2023. The country’s private rents are also expected to increase, albeit at a slower pace.

Borrowing costs in Singapore have surged, as the US Federal Reserve and other central banks hike rates to curb inflation. Singapore’s three major banks raised their fixed home loan interest rates in November.

The three-month compound average Singapore overnight rate — used by banks to set interest rates for mortgages — has jumped to about 3% from 0.2% a year prior.