for your financial planning

DBS Group Research • October 2021DBS Asian Insights98SECTOR BRIEFING

Will Property Still Be Your Pot of Gold?

Why More Isn’t Always Better for Your Financial Planning

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DBS Asian Insights SECTOR BRIEFING 9802

Will Property Still Be Your Pot of Gold? Why More Isn’t Always Better for Your Financial Planning

Produced by:Asian Insights Office • DBS Group Research

go.dbs.com/research @dbsinsights [email protected]

Geraldine Tan EditorGwendolyn Tai Assistant EditorMartin Tacchi Art Director

Group Research

Derek [email protected]

Dale LAI [email protected]

Geraldine WONG [email protected]

Elizabelle PANG [email protected]

CBG Financial Planning

Lorna [email protected]

CBG Business Analytics

LI [email protected]

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Executive Summary

Singapore’s enduring love affair with propertyReality check: Things are not looking so rosy

Drivers of property pricesAspiring UpgradersDemographic shifts

Affordability: More room for prices to rise further?

Income growth out of sync with property price increasesAre households overstretching themselves?

Do property investments still offer the best returns?

Property and leverage – An unbeatable combo?Importance of diversification

Growing a diversified nest egg for your financial future

Holistic financial planning through DBS NAV PlannerDiscovering investment ideas through DBS Insights DirectMonetising your home for retirement

Singaporeans’ enduring love affair with property dates back to the 1980s, fuelled by the government’s narrative of owning one’s home and implementation of conducive housing policies. Currently, Singapore has one of the highest home ownership rates in the world1, with approximately 88% of resident households owning a home2. With Singapore’s strong economic growth through the years, many Singaporeans saw the value of their homes and property investments appreciate by multiple folds over time, which made property a major contributor to household net wealth. As of 2021, property formed close to 42% of total household assets and close to 48% of total household net worth3. As such, the stability of the property market will continue to play a vital role in driving household prosperity.

In this report, we analysed the drivers of property prices in Singapore and the role of property in one’s overall net worth and financial plans. By leveraging publicly available data (e.g., SingStat) and studying the anonymised database of approximately 1.2m of the bank’s customers4, we seek to understand key trends in the property market (e.g., affordability), households’ exposure to property assets and more. Key findings of the report:

1. Property, as a wealth accumulation strategy, worked well for earlier generations of Singaporeans. However, what may have worked for our parents may no longer be sufficient for us. The outlook of the property market remains uncertain, given the more modest property price growth in recent decades. While we note a recent upswing in buyer sentiment, especially from upgraders, we remain watchful of the pace of increase in the private property price index (PPI) and HDB resale index – which rose approximately 7% and 11%, respectively, over the past year despite the COVID-19 pandemic – on the back of the government’s continued hawkish stance on the property market.

2. While owning a property is deeply ingrained in our society, for individuals considering a second property, it is important to consider Singapore’s changing demographics amid an ageing population and tighter manpower policies. These factors may weigh on the longer-term demand and rental yield for residential properties. Furthermore, key overhangs for the property market include the prudential measures implemented by the government, their hawkish stance as property prices climb, and as the government looks toward mitigating the “lottery effect” of public housing in mature townships.

Executive Summary

Changing demographics, changing demand for

homes

1 Source: Ministry of National Development, 2021 MND | An Inclusive & Endearing Home 2 Refers to Proportion of Owner-Occupied Resident Households, which is defined by SingStat to be “the proportion

of households where the household reference person or any other member owns the house, and is as reported by respondents” Source: SingStat Data, 2021 DOS | SingStat Website - Households - Latest Data

3 Data as at 2Q2021. Source: SingStat Data, 2021. (DOS) | SingStat Table Builder – Household Sector Balance Sheet (End Of Period)

4 Sampling pool: Consumer banking (non-wealth) customers aged between 25-70 years old, excluding work permit holders, with an income-crediting account.

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Property formed close to 42% of total household

assets as of 2021

Property alone may not be enough


Increase in property prices outpacing salary

growth?

Demographics facing challenges in housing

affordability and retirement goals

High acquisition costs make property a less attractive investment

asset class


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3. The resilience in the property market over the past few years has been noteworthy, though some are beginning to question the sustainability of the growth in property prices and its implications on overall housing affordability. We have seen the pace of increase in property prices outpace that of gross domestic product (GDP) and salary growth, raising the risk of froth building up in the property market. We found evidence of stretched affordability ratios in recent years, with upgraders buying smaller homes. However, there may be a shift in preference towards bigger homes, with the prevalence of work-from-home arrangements spurred by the COVID-19 pandemic, which we believe would further stretch affordability. This also commensurate with the fact that more households are turning to dual incomes in order to achieve greater financial flexibility.

4. Based on DBS’ database on customers with property mortgage accounts with the bank, we found that affordability tends to be the most stretched (based on median mortgage-to-income ratios) among those with income up to S$5,999/month, and in the 30-49 age group. This age group was also found to exhibit the lowest propensity to invest. In our view, these trends highlight potential concerns about Singaporeans’ ability to reach their retirement goals.

5. Rather than putting all your eggs in one basket (i.e., mainly in property), consider growing your net worth through a diversified portfolio. While property may remain a core part of your portfolio (with the power of leverage serving as a double-edged sword for property investments), we believe the inclusion of other asset classes such as equities, REITs, and more will form a more balanced strategy in achieving your financial goals. After studying the total returns of different asset classes since the first quarter of 2009, we found the S&P500 and Singapore REITs exhibited the highest growth in invested capital, followed by property assets. Contrary to popular belief, returns from a second private property were relatively weaker due to lower loan-to-value (LTV) ratio and higher acquisition costs (e.g., Additional Buyer’s Stamp Duty or ABSD).

While property will no doubt continue to serve as a key retirement asset for many households, the adage attesting to property as a golden egg may be increasingly challenged given Singapore’s changing demographic trends.

Diversification is key; it is now pivotal for individuals to look beyond property to achieve a holistic financial plan. Holding a variety of assets will help reduce overexposure in a single asset class, which would protect your portfolio from market downturns in a single security. The right mix of assets – such as equities, bonds, REITs, alternatives, CPF/SRS savings, and cash – can help to manage risks and overall portfolio risk-reward ratios for property owners and investors.

Pivotal for individuals to look beyond property to achieve a holistic financial plan.

Singapore’s enduring love affair with property

5 Source: Ministry of National Development, 2021 MND | An Inclusive & Endearing Home6 Refers to Proportion of Owner-Occupied Resident Households, which is defined by SingStat to be “the

proportion of households where the household reference person or any other member owns the house, and is as reported by respondents” Source: SingStat Data, 2021


High property ownership rates among Singaporean households

Singaporeans’ love affair for property dates back to the 1980s, spurred by the narrative of owning one’s own home and the housing policies implemented by the Housing & Development Board (HDB) which has built more than three quarters of the homes that the Singaporean population is currently living in. Singapore has one of the highest home ownership rates in the world5, with approximately 88% of resident households owning a home6. Over the past 30 years, with Singapore’s economic progress and income growth, property prices have risen by a compounded annual growth rate (CAGR) of 5.9% for HDB, 4.8% for private property (landed), and 4.1% for private property (non-landed).

The Singapore property market rose 5.9% between 1991-2011, before slowing to a CAGR of 1.1% in 2011-2021. More specifically, in 1991- 2001, private property prices rose 6.8-7.7% and HDB resale by 11.1%, before slowing to a mere 1.0-1.2% and 0.9%, respectively, between 2011-2021 (Figure 2). For the earlier generation of Singaporeans, especially the baby boomers (defined as those born between 1946-1964), it is no surprise that property was a major contributor to household wealth over time.

Singapore has one of the highest rates of home ownership in the world.

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Quarter & YearHDB Resale Price Index Private Property Price Index (Non-Landed) Private Property Price Index (Landed)

Household sector net worth had multiplied by 4x over the past two decades. Household sector net worth in Singapore has grown from S$552bn in 2001 to S$2,295bn in 2021 (Figure 3). In line with the city-state’s economic growth, household sector net worth grew at a faster pace between 2001-2011, at a CAGR of 8.5%, compared with 6.3% in 2011-2021. Although property remains the largest asset class based on the percentage breakdown of the household sector balance sheet, property holdings, on an absolute basis, grew at a slower pace than Central Provident Fund (CPF) and life insurance.

Figure 1. Property price indices (HDB and private properties)

Figure 2. Property price indices (HDB and private properties) by decade

Note: Private Property Index (Non-Landed) and Private Property Index (Landed) refers to the respective Private Residential Property Price Indices (PPI) sourced from URA

Source: URA, Data.gov.sg, DBS

Note: Numbers above show the average returns and standard deviation of Private Property Index (Landed), Private Property Index (Non-Landed) and HDB Resale Price Index


Periods Private Property

Index (Landed)

Std. dev Private Property

Index (Non-

Landed)

Std. dev HDB Resale Price Index

Std. dev

1991 – 2001 7.7% 17.5% 6.8% 12.8% 11.1% 13.6%

2001 – 2011 5.8% 13.5% 4.3% 14.0% 5.8% 5.7%

2011 – 2021 1.0% 3.7% 1.2% 3.0% 0.9% 4.0%


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Private housing makes up the largest share of household sector assets. Within property assets, the holdings of private housing grew at a faster pace relative to that of public housing since 2013. Currently, private housing makes up more than 23% of total household sector assets, compared with 19% contributed by public housing – making private housing the largest component of household sector assets (Figure 3). We note that household sector assets are weighted towards property, which accounts for 42% of assets, while liquid assets (including currency, deposits, shares &

Figure 3. Household sector net worth & balance sheets

Note: Household Sector refers to all household institutional units that have engaged in economic activities in Singapore for at least a year, including: Singapore citizens, Permanent residents, Foreigners, and Unincorporated enterprises (e.g., sole proprietorships).

Source: SingStat, DBS

SGD Billion Dollars 2021 2Q 2011 2Q 2001 2Q 1995 2Q

Household Sector Net Worth 2,295 1,243 552 448

Assets 2,622 1,468 695 515

Financial Assets 1,530 740 334 210

Currency & Deposits 523 258 117 83

Shares & Securities 241 161 77 46

Life Insurance 264 110 37 10

Central Provident Fund (CPF) 485 198 90 62

Pension Funds 17 13 13 10

Residential Property Assets 1,093 728 361 305

Public Housing 487 368 193 136

Private Housing 606 360 167 170

Liabilities 327 224 142 67

Mortgage Loans 247 166 105 42

Financial Institutions 208 124 44 23

Housing & Development Board (HDB) 39 42 61 19

Personal Loans 81 58 38 25

Motor Vehicle 11 15 14 9

Credit/Charge Cards 10 7 3 1

Others 60 37 21 15

Property makes up close to 42% of total

household sector assets


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51.9%49.6%

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Pension Funds Shares & Securities

L ife Insurance Central Provident Fund (CPF) Currency & Deposits Property

securities) account for 29% (Figure 4). Even though property comprises the lion’s share of household sector assets, its percentage contribution has been declining – from approximately 52% in 2001 to 50% in 2011, and down to 42% in 2021 (Figure 4). This implies that Singapore households were likely building their net worth through other means over the years.

Improving financial health of Singapore households

Liabilities-to-asset ratios have been on a downward trend after reaching its peak of 21.3% in 2Q2002 (Figure 5), which reflects the improving financial health of Singapore households over the years. Even though mortgage loans made up the bulk of household liabilities (at more than 75% of total liabilities), improving liabilities-to-asset ratios over the years indicate Singapore households were more likely able to comfortably cover their financial obligations in recent years, relative to historical trends. Since 1995, the growth in household liabilities has mainly been attributed to the growth in mortgage loans, having multiplied by close to 6x from S$42bn in 1995 to S$247bn in 2021, compared with personal loans which multiplied by more than 3x from S$25bn in 1995 to S$81bn in 2021 (Figure 3).

Figure 4. Household sector assets (as of 2Q21)

Note: Household sector is defined as all household institutional units that have engaged in economic activities in Singapore for at least a year, including Singapore citizens, permanent residents, foreigners, and unincorporated enterprises (e.g., sole proprietorships).


Liabilities-to-asset ratio reached historical lows in

1Q2021

Currency & Deposits

19.9%

Shares & Securities

9.2%

Life Insurance

10.1%

Central Provident Fund (CPF)18.5%

Pension Funds0.6%

Property41.7%

Household AssetsSGD 2,622 Billions


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Household Liabilities-to-assets (%)

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Household Assets (LHS) Household Liabilities (LHS) Household Liabilities-to-assets (%) (RHS)

Reality check: Things are not looking so rosy Will the future be the same? While property was one of the key drivers of wealth accumulation for the past generations of homeowners, the tailwinds that drove the strong run in property prices over the past 20 to 30 years may not continue in the future. Trends influencing future property demand and prices include Singapore’s changing demographics and lifestyle needs/preferences. Furthermore, household affordability vis-a-vis income growth prospects, as well as potential changes in government policies, are also key considerations for the property market.

Financial planning is key

Assess your home purchase in relation to your financial plan and other investments. This will help to provide more clarity on your overall financial health and enable you to understand how your other goals may be impacted in the short and long term.

Home planning tips: Affordability is key when it comes to purchasing a big-ticket item like property – do your sums carefully to see if you will be able to commit to the mortgage payments over time before making your purchase. Lenders will assess


Figure 5. Household sector balance sheets and liabilities-to-assets (%)


a variety of factors such as your monthly income, debt, credit score and more. For instance, financial institutions use measures such as total debt servicing ratio (TDSR) and mortgage servicing ratio (MSR) to ascertain your financial health and ability to repay financial obligations. Do note that expenses may grow after you upgrade to a bigger house or purchase additional properties. It is also important to consider these increased expenses when deciding on the quantum of your housing loan.


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The tailwinds that drove strong property prices over the past 20 to 30 years may not continue…

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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Year

% of Singaporean citizens

Aspiring Upgraders Robust upgrader demand for private properties

A private property is deemed by many to be an aspirational asset class. Over the years, we have seen many households dipping back into the property market to purchase their second home or an investment property. These households are widely known as upgraders, wherein demand from these upgraders anchors the annual demand for private properties. These upgraders are primarily households who have bought their first public home from HDB and are looking to buy a bigger home due to an expanding family nucleus and/or for aspirational reasons.

Based on data from Urban Redevelopment Authority (URA), Singapore citizens contributed to approximately 82% of total private property sales in 2020, while permanent residents (PRs) and foreigners contributed close to 14% and 4% of transactions, respectively (Figure 6). While a portion of these buyers could be first-time buyers, we believe a substantial number of them are upgraders. Further, we believe these upgraders will continue to support demand for homes in the future.

Figure 6. Breakdown of private property purchases

Drivers of property prices

Proportion of Singaporean private property buyers are rising

Source: URA, DBS

Homeowners upgrading for expanding families or aspirational reasons


China 32%

Malaysia21%India

10%

Indonesia 1%

Australia 16%

Others20%

14%

4%

0%2%4%6%8%

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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Year

% of PRs and Foreigners

Permanent Residents (PR) Foreigners

Figure 6. Breakdown of private property purchases (cont.)

Increase in the number of public housing passing the minimum occupation period (MOP) will likely drive more households into the private market. In recent years, and spurred by the COVID-19 pandemic, we are seeing a shift in preference towards larger homes to accommodate work-from-home needs as companies pivot towards more flexible working arrangements.

Proportion of PRs and foreigners private property buyers are decreasing

Major nationalities of buyers purchasing a private home

Source: URA, DBS

Source: URA, DBS

14%

4%


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Upgraders’ demand for new homes to average between 6,000-7000 units p.a. over the coming decade.

1177,,006600

1199,,664455

1177,,550000

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2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Number of Units

Year

Number of HDB flats to complete 5-year Minimum Occupation Period (MOP)

HDB Units that reach MOP Assumed Upgrader Demand (30%) Average

Source: DOS, MND, DBS

New home sizes to increase by at least 20%

In our analysis, the number of HDB flats that will complete the MOP is estimated to increase to 17,000-19,000 per annum over the next 10 years (Figure 7). These households would be eligible to purchase a new home and are likely to sell their existing flats to fund the purchase. Assuming 35-40% of these homeowners choose to upgrade to a new home, we estimate demand from this segment of the market to average between 6,000-7000 units per annum (p.a.) over the coming decade.

Demand for bigger homes post-pandemic; but are they out of reach for most? Post COVID-19, buyers’ preferences will likely change, especially as more companies adopt flexible working arrangements going forward. With work-from-home becoming more prevalent, we believe many households will prefer bigger homes if it is financially feasible.

From 2019 onwards, the government put in place new measures requiring developers to increase the size of residential units constructed to at least 85sqm (100sqm in selected areas) for homes outside the Core Central Region (CCR). This will set a new trend going forward, in which we estimate the size of new homes to increase by at least 20%. Given that home prices have risen steadily over the past few years and during the COVID-19 pandemic, we believe prospective buyers looking to purchase a bigger home will likely be constrained by the overall quantum.

Figure 7. Number of HDB units with 5-year MOP


Hefty down payments for new homes a key limitation for private property homebuyers while investors need to cough out even more cash. Based on our analysis, due to current stamp duties (e.g., additional buyer’s stamp duty or ABSD) and applicable mortgage limits, prospective Singapore buyers will need to fork out at least 28% in cash and/or from their CPF for their first property purchase in the private market. Assuming a 1,000 sqft executive condominium (EC) is worth S$1.2m, a buyer would have to fork out close to S$330,600 in cash. For a private property worth S$1.75m, this would increase to approximately S$483,700 (first private property). Those looking to purchase their second or third property, the upfront cash portion would increase to 70% to 83% of the home’s value, implying that current property measures are restrictive for investors.

As such, we believe most prospective buyers will likely look to sell their homes in a bid to contain upfront costs when purchasing their new homes. For example, if a household with a Build-To-Order (BTO) flat sells their home in the resale market for an average of S$850,000, the household would make a profit of close to S$450,000, assuming an initial house value of S$400,000. These proceeds will come in handy towards the down payment for their first private property or EC. Separately, foreigners will have to fork out a hefty 48% of the home’s value in cash, upfront, for their purchase; these are likely affluent buyers to be able to do so.

Figure 8. Historical average home sizes from 2005 to 2021

Prospective buyers are most likely to sell their

initial homes to finance down payment

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Home sizes (Sqft)

Average home sizes (new sales) Home sizes (post new policies)

Forecasts of home sizes

Source: URA, DBS

In 2017, we argued that home sizes will continue to shrink. They have shrunk faster than projected.

Post policy response in October 2018, average new launch will increase to 920sqft vs previous expectations of 800 sqft.


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Overall, we believe upgraders will continue to provide some support to property demand.

Demographic shiftsSingapore’s declining population growth

Slowing population growth and an ageing population may have longer-term implications on the demand for homes. Key drivers for housing demand include population growth and household formation trends. Singapore’s population grew by an average of 3.5% per annum from 4.3m in 2005 to 5.1m in 2010 (Figure 10), increasing by close to 1m people in a short span of five years, which drove up demand for property and subsequently, property prices. Since then, population growth slowed to an average of 1.1% from 2010-2020, followed by modest growth rate of 0.5% per annum in the last five years. According to the Population White Paper published in 2013, the government has put in place planning parameters to support a population size of 6.5-6.9m. Even though the government has stated that these estimates are just planning parameters as part of infrastructure plans rather than hard targets, these

Source: DBS

Figure 9. Scenarios of different cash outlays for various types of property buyers

HDB (BTO)

4-room

Executive Condominium

Private Property

(Singapore Citizen)

Private Property 2 (Singapore

Citizen)

Private Property 3 (Singapore

Citizen)

Private Property (Foreign Citizen)

House Value 400,000 1,200,000 1,750,000 1,750,000 1,750,000 1,750,000

Maximum LTV 360,000 900,000 1,312,500 787,500 612,500 1,312,500

Down Payment 40,000 300,000 437,500 962,500 1,137,500 437,500

Stamp Duties (including ABSD) 6,600 30,600 46,200 256,200 308,700 396,200

Total Cash Outlay 46,600 330,600 483,700 1,218,700 1,446,200 833,700

Monthly Mortgage Payment 1,131 3,327 4,851 2,911 2,264 4,851

Minimum Monthly Salary 4,435 11,089 16,172 9,703 7,546 16,171

Cash outlay / Value of house 12% 28% 28% 70% 83% 48%

Loan-To-Value (LTV) 90% 75% 75% 45% 35% 75%

Assumed Interest Rate 2% 2% 2% 2% 2% 2%

TDSR/MSR 30% 30% 60% 60% 60% 60%


projection ranges are important considerations in charting the future growth of the property market.

Ageing population

With ongoing tweaks in our manpower policies, we note that overall population growth has slowed considerably to 0.5% per annum over the past five years. The proportion of residents to non-residents has stayed relatively stable at 70% to 30% (Figure 11). However, Singapore is also experiencing an ageing population, like many other developed countries. This is illustrated by the downward trend in Singapore’s old-age support ratios over the decades, which measures the number of residents aged 20-64 (working-age population) relative to the resident population aged 65 and above (elderly population), declining from 7.4 in 2010 to 4.3 in 2020 (Figure 10). Singapore’s old-age support ratios are likely to continue its downward trend if growth in the working-age population is unable to catch up with that of the elderly population. Factors contributing to this downward trend include rising life expectancy and falling birth rates.

As a result of Singapore’s ageing population, there will likely be longer-term implications for the property market, especially as the older generation looks to smaller homes and their increased needs for amenities such as healthcare.

Figure 10. Population growth and old-age support ratios (%)

Note: Old-age support ratios are computed as the ratio of the working age population (e.g., aged 20-64 years) per person aged 65 years and over in Singapore. Old-age support ratio relates to the number of people who can provide economic

support to the number of older people who may be dependent on others’ support.Source: SingStat, DBS

2005 2010 2015 2020

Singapore total population 4,265,762 5,076,732 5,535,002 5,685,800

Resident 3,467,814 3,771,721 3,902,590 4,044,200

Non-resident 797,948 1,305,011 1,632,312 1,641,600

Age: 0 – 19 years 850,155 918,159 755,056 803,400

Age: 20 – 64 years 2,347,167 2,515,175 2,705,981 2,626,400

Age: More than 65 years 270,492 338,387 441,553 614,400

Old-age support ratio 8.1 7.4 6.2 4.3

Declining working-age population relative to

elderly population


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Later marriages and low birth rates

While Singaporeans are still getting married, they are settling down later in life. Contrary to popular belief that more Singaporeans are opting to remain single, the breakdown of the population by marital status has largely remained consistent across the past 20 years, with approximately 59-62% of the resident population aged 15 and above being married, and 30-32% being single (Figure 12). While Singaporeans are generally looking to settle down, more are doing so at a later stage in their lives. The bulk of marriages happen between ages 29 and 34, where 38% of Singaporeans transition from singlehood to married life. This is a stark contrast to what Singapore saw a decade ago, where the bulk of marriages (36%) happened before Singaporeans hit their 30s, versus a mere 25% in 2020. Singaporeans may be opting to spend more years focusing on tertiary education or their careers, possibly driven by concerns related to the rising cost of living and financial burden of raising a family in Singapore.

Figure 11. Singapore population breakdown

Figure 12. Singapore marital status and age group breakdown

% of resident population (aged 15 and above) by marital status

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2010

Resident Non-resident

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2020

Resident Non-residentSource: SingStat, DBS


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Figure 12. Singapore martial status and age group breakdown (cont.)

Persistent low birth rates will likely have longer-term implications on future demand for properties. Like many other developed countries such as Hong Kong and Japan, Singapore has been experiencing a decline in its birth rates over the past decades. Singapore’s total fertility rate (TFR) declined from 1.83 in 1990 to a historic low of 1.1 in 2020 (Figure 13). This phenomenon may be attributed to Singaporeans choosing to settle down later in life.

Pro-fertility policies such as financial incentives and flexible work arrangements have been rolled out over the years to boost fertility rates. Despite that, Singapore’s TFR continues to remain way below the replacement rate of 2.1, placing Singapore’s TFR as one of the lowest in the world7. This is also commensurate with the fact that average household size in Singapore has shrunk from 3.70 in 2000 to 3.22 in 2020. Households with two to four persons generally make up the bulk of household sizes in Singapore, weighing in at a total of 63% (Figure 14).

7 Source: Central Intelligence Agency.gov, Statistica, 2021

Percentage of single residents by age group in 2010 and 2020

20102020


94.8%

64.0%

30.8%

18.7%14.7% 13.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20-24Years

25-29Years

30-34Years

35-39Years

40-44Years

45-49Years

2010Proportion of single residents (%)


19

1.1

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Total Fertility Rate

Year

Replacement rate of 2.1

Figure 13. Singapore fertility rates and average household size



Decline in total fertility rates

Average household size in Singapore (including domestic helper)

3.70

3.22

2.80

2.90

3.00

3.10

3.20

3.30

3.40

3.50

3.60

3.70

3.80

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Year

Average household size in Singapore (including domestic helper) (persons)

3.22

3.70


16%

23%

20%

20%

12%

9%

1-Person

2-Person

3-Person

4-Person

5-Person

6-Person or larger

Small families likely to make up the bulk of Singapore’s households. Smaller homes and families with up to two children are likely the standard for most households in Singapore. Couples and/or upgraders may be looking at 4-bedroom units to accommodate all parties, although in recent times we have seen a rise in demand for bigger homes due to the rising adoption of flexible working/work-from-home arrangements. Those with deeper pockets may also opt for 5-room/4-bedroom units with an additional study room to cater to work-from-home arrangements.

Long-term effects of declining population growth

Ageing population to weigh on demand in the long term. Data from the Department of Statistics show that Singapore’s average life expectancy rose from 63 years in 1960 to 84 years in 2020, one of the highest in the world. This drastic improvement in life expectancy, coupled with falling fertility rates, has resulted in a rapidly ageing population. This trend is unlikely to be broken in the foreseeable future. Singapore’s median age and old age dependency ratios are expected to increase further, from 42.2 years old and 21.6 in 2020 to 53.4 years old and 58.8 in 2050, respectively (Figure 15).

At current fertility and mortality trends, Singapore’s population is expected to shrink from 2030 onwards. Singapore has taken steps to mitigate this issue through pro-immigration policies, but there are limitations due to the political and social considerations involved. Nonetheless, pro-immigration policies would only delay the inevitable.

It is projected that Singapore’s total population will peak around 2045. If Singapore’s current migration flows remain unchanged, an ageing and shrinking population will subsequently result in a decline in future housing demand, which would weigh on property prices going forward.

Figure 14. Average household size in Singapore


One of the highest life expectancies in the

world

Population to shrink from 2030 onwards


21

Overall, we believe Singapore’s slowing population growth, ageing population, and shrinking family sizes will likely weigh on property demand and prices in the longer term.

Figure 15. Forecast of Singapore population trends

42.2 44.6 46.8 48.8 50.5 52.1 53.4

0

10

20

30

40

50

60

2020 2025 2030 2035 2040 2045 2050

Years Old

Year

21.626

34.541.5

48.554.1

58.8

0

10

20

30

40

50

60

70

2020 2025 2030 2035 2040 2045 2050

Ratio

Year

Ratio of populationaged 65+ per 100

Median age will continue to rise

Ratio

Old-age dependency ratios will keep rising

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

1965 1975 1985 1995 2005 2015 2025 2035 2045 2055 2065

Million pax

Zero growth from here on

Total population

Total population ex immigration

Source: United Nations8, DBS

8 United Nations, Department of Economic and Social Affairs, Population Division (2019). World Population Prospects 2019, custom data acquired via website.

Ratio of population aged 65+ per 100 person

21.626

34.541.5

48.554.1

58.8

0

10

20

30

40

50

60

70

2020 2025 2030 2035 2040 2045 2050

Ratio

Year

Ratio of populationaged 65+ per 100

Population to decline in the future at current growth rates

Years old


80

100

120

140

160

180

200

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

3Q20

4Q20

1Q21

2Q21

Price Index (1Q2009 to current) (1Q2009 = 100 i.e. Base)


Figure 16. Property price indices (landed, non-landed and HDB)

Reaching new highs but is it getting out of reach? The property market remained largely resilient throughout the COVID-19 crisis, and we believe its uptrend will continue as economic conditions improve from 2021 onwards. The resilient performance of the property market in 2020 has infused positive sentiments among buyers, in view that prices are likely to continue their uptrend given the improving economic outlook, employment opportunities, and salary growth in the near term. As a result, property buyers (including investors) have re-entered the property market over the past year in anticipation of the continuation of the resilient and steady growth in property prices.

As of June 2021, the private Property Price Index (PPI) achieved a new high and rose approximately 7.1% over the past year to above pre-COVID-19 levels. Similarly, the HDB Resale index has also risen, albeit at a higher rate of 10.9%. We note that the growth in property prices in the Outside Central Region (OCR) and Rest of Central Region (RCR) have outpaced that of the Core Central Region (CCR).

The resilience in the property market amid the COVID-19 pandemic has been noteworthy. However, some are beginning to question the sustainability of the growth in property prices and its implications on overall housing affordability, especially when the pace of increase in property prices could potentially outpace that of GDP and salary growth, which raises the risk of froth building up in the property market.

Affordability: More room for prices to rise further?

Old-age dependency ratios will keep rising

Source: URA, DBS

Private PPI rose by 7.1%, above pre-COVID levels; HDB Resale index

rose 10.9%


23

80

100

120

140

160

180

200

1Q09

3Q09

1Q10

3Q10

1Q11

3Q11

1Q12

3Q12

1Q13

3Q13

1Q14

3Q14

1Q15

3Q15

1Q16

3Q16

1Q17

3Q17

1Q18

3Q18

1Q19

3Q19

1Q20

3Q20

1Q21

Price Index (1Q2009 to current) (1Q2009 = 100 i.e.

Base)

Quarter & Year

Core Central Region Rest of Central Region Outside Central Region

Income growth out of sync with property price increases A sustainable property market should be accompanied by income growth. We believe an upward growth in home prices is only sustainable if it is supported by increases in household income. This would help to keep home affordability within sustainable levels, prevent home prices from getting out of reach for the average/median-income Singapore household, and ensure sustainable property price growth.

Based on SingStat data dating back to 2000, we found that the average median household income in Singapore more than doubled from S$4,398 in 2000, to S$9,189 in 2020, at an approximate 20-year CAGR of 3.8% per annum. This is likely attributed to the fact that the salary band with the largest proportion of households has shifted from Below S$3,000 (around 29%) in the past, to S$15,000 and Above (around 24%) (Figure 18).

Figure 17. Property price indices (by segment)

Source: URA, DBS

The increase in property prices could potentially outpace GDP and salary growth, raising the risk of froth building up in the property market.

Around 24% of households today have

a monthly income of S$15,000 and above


10.5

18.7

16.2

19.8

16.1

6.5

12.3

Mon

thly

hou

seho

ld in

com

eUnclassified

Below $3,000

$3,000 - $5,000

$5,000 - $8,000

$8,000 - $12,000

$12,000 - $15,000

$15,000 and above

2010

Figure 18. Monthly household income from work, per 100 households

Figure 19. Income growth compared with PPI growth over 2000 to 2020

* Unclassified = households with no working person or fully retired households. Source: SingStat, DBS

*2Q21 index numbers are used. Source: SingStat, DBS

Historically, income growth had generally kept pace with property price increases, except in the past five years. We found that higher property prices were generally supported by higher household incomes, although part of this was driven by a rising proportion of dual-income households (1.77x to 1.89x working persons per household). That said, we note that in the past five years, income growth has, in fact, slowed to a mere 1.2% (median income) and 1.7% (80th percentile) (Figure 19) – one of the lowest growth rates in 20 years – while property prices rose at a faster pace of 2.1%.

Income growth in the past five years is one of

the lowest in 20 years

13.3

12.2

10.6

15.2

16.6

8.8

23.5M

onth

ly h

ouse

hold

inco

me

Unclassified

Below $3,000

$3,000 - $5,000

$5,000 - $8,000

$8,000 - $12,000

$12,000 - $15,000

$15,000 and above

2020

8.6

28.7

22.8

20.1

11.3

3.5

5.0

Mon

thly

hou

seho

ld in

com

e

Unclassified

Below $3,000

$3,000 - $5,000

$5,000 - $8,000

$8,000 - $12,000

$12,000 - $15,000

$15,000 and above

2000

Year Ave working

per household

Median Household (with CPF)

S$/m

%

CAGR

80th Percentile (with CPF)

%

CAGR

PPI PPI Chg HDB Resale Index

% Chg

2000 1.77 4,398 - 7,608 - 94.9 - 75.8 -

2005 1.75 4,831 1.9% 8,641 2.6% 84.5 -2.3% 73.5 -0.6%

2010 1.86 6,342 5.6% 11,105 5.1% 139.2 10.5% 124.4 11.1%

2015 1.96 8,666 6.4% 14,929 6.1% 141.6 0.3% 134.8 1.6%

2020 1.89 9,189 1.2% 16,247 1.7% 163.5* 2.1% 146.4* 0.5%

2000 -2020 3.8% 3.9% 2.5% 3.0%

2000-2010 3.7% 3.9% 3.9% 5.1%

2010 – 2020 3.8% 3.9% 1.2% 1.0%

2000 2010 2020


25

12.1 12.7 12.3 13.3 13.2

14.3

16.6

13.0 13.6

14.8

12.5 11.7 11.8 11.6

10.3 10.1 11.2 11.5 11.7 12.2

6.9 7.2 6.97.6 7.4

8.09.4

7.3 7.68.5

7.2 6.7 6.7 6.66.0 5.8 6.3 6.6 6.5 6.9

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Price-to-income ratio

Year

Recessions/downcycles Median Income 80th percentile

Dotcom/SARS GFC COVID-19

Price-to-income ratios are inching towards the higher end of 10-year averages. We compared the price-to-income ratio of the median household income as well as that of the 80th income percentile against the median transacted quantum of a private property in Singapore, to gauge home affordability. The average transacted quantum has increased by approximately 3.8% per annum between 2001 and 2Q2021, while the median household income has increased by approximately 3.4% over the same period. With the recent strength of the property market, price-to-income ratios have increased to 12.2x for the median household and 6.9x for a household in the 80th income percentile in 2020 (Figure 20).

Over the past 20 years, price-to-income ratios for the median household ranged between 10.1-16.6x, while that of a household in the 80th income percentile ranged between 5.8-9.4x

Prior to the declines in the PPI on the back of economic crises, price-to-income ratios ranged around 12.1x (in 2001) to 16.6x (in 2007) for the median household, before falling to approximately 11.0x from 2010 onwards. Conversely, for the 80th percentile, price-to-income ratios ranged around 6.9x (in 2001) to 9.4x (in 2007), before falling to around 6.5x from 2010 onwards.

Figure 20. Price-to-income ratio (median household & 80th percentile)

Source: URA, DBS

Price-to-income ratio increased to 12.2x for the median household

in 2020

12.1 12.7 12.3 13.3 13.2

14.3

16.6

13.0 13.6

14.8

12.5 11.7 11.8 11.6

10.3 10.1 11.2 11.5 11.7 12.2

6.9 7.2 6.97.6 7.4

8.09.4

7.3 7.68.5

7.2 6.7 6.7 6.66.0 5.8 6.3 6.6 6.5 6.9

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Price-to-income ratio

Year

Recessions/downcycles Median Income 80th percentile




-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021

S$m

Year

New Launches Resale

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021

Average S$ psf

Year

New Launches Resale

10.3 10.1 11.2 11.5 11.7 12.2

6.0 5.8 6.3 6.6 6.56.9

14.7

8.3

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2015 2016 2017 2018 2019 2020

Price-to-income ratios

YearMedian Income 80th percentile

600

800

1,000

1,200

1,400

1,600

1,800

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021

Average sizes sqft

(resale/ new launches)

Year

New Launches Resale

The trade-off between quantum and size. While transaction quantum has remained on a steady uptrend, we note that for new homes, there has been an average 20% drop in median sizes, even though average price on a per square foot basis (S$psf) has risen by approximately 50% (Figure 21) since 2010.

Affordability will be stretched further once homeowners trade up to a bigger home. The COVID-19 pandemic has resulted in a shift in preference towards bigger homes as work-from-home trends normalise. Based on an assumed size of 950 sqft (which is close to the average size of new homes back in 2010), we estimate the average transaction quantum to increase by 13%, with price-to-income ratios for the median income household at the higher end of 5-year historical estimates, i.e., levels we believe are likely to cause some concern among the authorities.

Figure 21. Transaction quantum and price-to-income ratios

Median home sizes dropped 20% while

S$psf rose around 50% since 2010

Transaction quantum between resale and new homes has converged

Assumed price-to-income ratios to hit multi-year highs if homebuyers buy bigger homes

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021

Average S$ psf

Year

New Launches Resale

Average sizes have declined 20% since 2010 Average S$psf increased by 50% since 2010

Average sizes sqft Average S$ psf

Price-to-income ratios

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021

Average S$ psf

Year

New Launches ResaleSource: URA, DBS


27

47.1%

32.6%

5.8%

14.5%

52.5%

24.9%

7.4%

15.2%

0.0% 10.0%20.0%30.0%40.0%50.0%60.0%

Dual-income

Only Husband Employed

Only Wife Employed

Both Not Employed

% Breakdown (2020 vs 2010)

2020

2010

7,602

3,701

2,194

11,101

5,070

3,213

- 4,000 8,000 12,000

Dual-income

Only Husband Employed

Only Wife Employed

Median Income (S$/mth) (2020 vs 2010)

2020

2010

Are households overstretching themselves?Singapore had seen an increase in the number of dual-income households over the years, contributed by factors such as an increase in cost of living, greater labour force participation within the female population, changing societal norms and more.

According to SingStat, the proportion of married couples with dual incomes has increased to 52.5% in 2020 from 47.1% in 2010 (Figure 22). Dual-income households have a median combined income of S$11,101, which is higher than that of single-income households. Single-income households with only the husband employed had a median income of S$5,070, as compared with single-income households with only the wife employed with a median income of S$3,213. Furthermore, the number of married couples with equal qualifications had increased from 44.3% in 2010 to 46.6% in 2020.

Benefits of a dual-income household. Dual-income households have greater financial flexibility and security as couples are able to rely on their spouses to support their lifestyles. Based on a 2017/18 household expenditure survey, households are spending on average S$4,900/month on goods and services. When we compare this against the median resident household combined income of S$11,101 in 2020, this forms close to 45% of their monthly income (Figure 22).

Mortgage payments typically make up the largest component of a household’s monthly recurring expense. Based on our analysis on mortgage-to-income ratios within the private property market9, we found that mortgage-to-income ratios, across various age groups, range between 0.26 to 0.32 (i.e., 26-32%) (Figure 23). We note

Figure 22. Proportion and median monthly income of married couples


More dual-income households over the

years

Labour force status of married couples in resident households

Median monthly income of married couples in resident households

9 Note: Analysis is based on existing property mortgage loans with DBS Bank. Mortgage data are predominantly private mortgage loans but may have some HDB loans, though at small numbers. Mortgage-to-income ratios is based on the monthly mortgage payment on an individual customer level

(%) Breakdown (2020 vs 2010) Median Income (S$/mth) (2020 vs 2010)


46%

35%

27% 27% 28%

33%

38%

30%

24%21% 20%

27%34%

27%

22%20% 19%

22%

10%

15%

20%

25%

30%

35%

40%

45%

50%

$2999 and below $3000-$5999 $6000-$8999 $9000-$11999 $12000-$14999 $15000 and aboveIncome group

Average Min to Max

that homeowners in the 30-39 and 40-49 age groups tend to have higher mortgage-to-income ratios at an average of 0.27 (27%) (ranging between 19-46%) and 0.26 (26%) (ranging between 19-39%), respectively. These age groups are most probably experiencing a peak in their financial commitments, with priorities such as starting a family, upgrading to a new home and more.

Across various income groups, we note that mortgage-to-income ratios are the highest at the opposite ends of the income spectrum. We found that homeowners within the lower-income groups (earning <S$2,999/month and between S$3,000-S$5,999/month) are more likely to stretch themselves financially, with mortgage-to-income ratios averaging between 0.30 and 0.38 (30-38%).

What if one loses his/her job? Based on our estimates, a 20% drop in income will drive mortgage servicing ratios up by 5-9%, which will result in significant financial stress on households.

Figure 23. Mortgage-to-income ratios, by age and income groups

Lower-income and middle-aged groups

more likely to stretch themselves financially

Mortgage-to-income ratio by age group

Mortgage-to-income ratio by income group

45%46%

39%

34% 35%32%

27%26% 26%

30%

27%

19% 19% 20%

26%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Below 30 30-39 years 40-49 years 50-59 years 60 years and aboveAge group

Average Min to Max

Source: DBS Business Analytics

Disclaimer: DBS data shown takes into consideration the number of Singapore residents who have salaried accounts with the bank. Mortgage data mostly captures private property loans and is based on the monthly mortgage payment on an individual customer level. Mortgage data may have some HDB loans, though at small numbers. On a household level, mortgage-to-income ratios are likely to be less/half of the ratios shown.

Further, to calculate the mortgage-to-income ratios shown, we took the median monthly mortgage payment within each group based on DBS data and divided it by the min/mid point of each income range. As a form of illustration, for the age group Below 30, the 45% mortgage-to-income ratio is derived by taking the median monthly mortgage payment, divided by the minimum assumed income of S$2,999. For the remaining income groups, we divided the monthly mortgage payments with the mid point of each income range: 27% for Below 30 is obtained by taking monthly mortgage payment divided by S$7,500 (midpoint of S$6,000-8,999 salary range). Average value of 32% for Below 30 is then taken by averaging the mortgage-to-income ratios across the different income groups.

46%

35%

27% 27% 28%

33%

38%

30%

24%21% 20%

27%34%

27%

22%20% 19%

22%

10%

15%

20%

25%

30%

35%

40%

45%

50%


Average Min to Max46%

35%

27% 27% 28%

33%

38%

30%

24%21% 20%

27%34%

27%

22%20% 19%

22%

10%

15%

20%

25%

30%

35%

40%

45%

50%



35%

27% 27% 28%

33%

38%

30%

24%21% 20%

27%34%

27%

22%20% 19%

22%

10%

15%

20%

25%

30%

35%

40%

45%

50%



35%

27% 27% 28%

33%

38%

30%

24%21% 20%

27%34%

27%

22%20% 19%

22%

10%

15%

20%

25%

30%

35%

40%

45%

50%


Average Min to Max


29

Additional factors to consider

(+) Supply chain disruptions have led to delays in home completions. Homebuyers are facing delays due to disruptions and higher costs within the construction industry. The rise in labour cost due to tighter border restrictions, increases in raw material (cement and steel) costs, coupled with slower construction progress, have contributed to the upward pressure in prices which is expected to remain sticky in the medium term. Some respite is offered through the extension of timelines for developers and the push back in non-essential public infrastructure projects in order to direct resources toward essential projects. Though, higher construction costs are likely to stay. Additionally, HDB residential developments are expected to see an additional year of delay, on top of the typical 4-5 years of completion time needed. This will likely push prospective households into the HDB resale or private resale market instead.

(-) Government had historically maintained a hawkish view in ensuring property market stability. The government keeps a close watch on property prices and has historically introduced prudential measures to ensure stability within the property market. The government may potentially tweak the supply of new homes and initiate further measures if the growth in property prices is not supported by fundamentals. The upcoming public housing supply is estimated to be approximately 16,000 units, which will likely be met by upgrader demand.

(-) Rental market demand remains uncertain, especially with changing foreign manpower policies, implying a possible slowdown in the volume of expatriates (expats) seeking rental homes.

(-) Implications from HDB lease decay remains to be seen. The HDB lease decay may potentially result in long-term implications on the value of HDB flats and on the household sector’s net worth, especially as approximately 80% of the population reside in a HDB apartment.

Homeowners in the lower-income and middle-aged groups are more likely to stretch themselves financially.


It is a common belief that property investments offer the best returns. Many Singaporeans grew up watching the value of their parents’ property appreciate by multiple folds. Between 1991-2001, the prices of HDB resale and private residential properties grew at a CAGR of 11.1% and 6.8-7.7%, respectively (Figure 24), making property a highly favoured asset class among our parents’ generation.

However, we have witnessed a slowdown in the growth rates of HDB resale and private residential property prices in recent decades, with prices growing at a mere CAGR of 0.9% for HDB resale and 1.0-1.2% for private properties from 2011 to 2021 (Figure 25). With more modest price growth in recent decades, it is unclear if the investment strategy that had previously worked for our parents would remain sufficient for us going forward.

Do property investments still offer the best returns?

What may work for your parents may not

be enough for you

Figure 24. Property price indices (HDB and private properties)

Figure 25. Property price indices (HDB and private properties), by decades

020406080

100120140160180200

Price index (1990 to current)(1Q2009 = 100 i.e. Base)

1Q90

4Q90

3Q91

2Q92

1Q93

4Q93

3Q94

2Q95

1Q96

4Q96

3Q97

2Q98

1Q99

4Q99

3Q00

2Q01

1Q02

4Q02

3Q03

2Q04

1Q05

4Q05

3Q06

2Q07

1Q08

4Q08

3Q09

2Q10

1Q11

4Q11

3Q12

2Q13

1Q14

4Q14

3Q15

2Q16

1Q17

4Q17

3Q18

2Q19

1Q20

4Q20


Periods Private Property

Index (Landed)

Std. dev Private Property

Index (Non-Landed)

Std. dev HDB Resale Price Index

Std. dev

1991 – 2001 7.7% 17.5% 6.8% 12.8% 11.1% 13.6%

2001 – 2011 5.8% 13.5% 4.3% 14.0% 5.8% 5.7%

2011 - 2021 1.0% 3.7% 1.2% 3.0% 0.9% 4.0%

Note: Numbers above show the average returns and standard deviation, i.e., risk of private properties and HDB resaleSource: URA, Data.gov.sg, DBS

Note: Private Property Index (Non-Landed) and Private Property Index (Landed) refers to the respective Private Residential Property Price Indices (PPI) sourced from URA

Source: URA, Data.gov.sg, DBS Bank


31

The property market used to offer attractive returns, especially for buyers who bought during major cyclical troughs (e.g., 1990, 1998). However, the peak-to-trough performance for the property market had since tapered from the last market peak witnessed at the end of 1996/1997.

For example, between 1990-1996, the annualised returns for private properties (measured by the PPI) amounted to 24%, versus 12% between 2009-2013. The same trend can also be seen with HDB resale prices, where the annualised returns declined from 34% between 1993-1997 to 11% between 2006-2013, signalling more modest property returns in recent decades (Figure 26).

The slowdown in property prices can be partly attributed to cooling measures such as seller’s stamp duty (SSD), loan-to-value (LTV) limits, additional buyer’s stamp duty (ABSD) and more, which were introduced since 2010 and are still in place. Property prices largely stabilised after the implementation of cooling measures (Figure 27), with the relatively muted quarter-on-quarter (q-o-q) changes in price indices as represented by the dotted lines in the grey shaded areas. The cooling measures had inevitably resulted in more modest property returns in recent decades.

Property market returns not as attractive as

before

Slowdown in property prices can be partly

attributed to cooling measures

Figure 26. Trough to peak returns

Trough Date Trough Price

(Index Value)

Peak Date

Peak Price (Index Value)

Duration (No. of

Quarters)

Peak-to-trough returns

(%)

Annualised Returns

Private Property

30/12/90 40.3 30/6/96 129.7 22 222% 24%

30/12/98 71.5 30/6/00 100.4 6 40% 25%

30/3/04 80.3 30/6/08 126.9 17 58% 11%

30/6/09 95.3 30/9/13 154.6 17 62% 12%

HDB Resale

30/3/93 30.2 30/3/97 98.6 16 226% 34%

30/12/06 74.9 30/6/13 149.4 26 99% 11%

Note: Peak-to-trough returns is calculated as the total returns at the peak price from the trough price,

i.e., Peak-to-trough returns = -1,

which is the total returns generated over the period between the trough date and peak date. Annualised returns take into consideration the duration.


(Trough price)(Peak price)


Median quarterly price changes

HDB Resale Private Properties

Before cooling measures 1.06% 1.33%

After cooling measures 0.04% 0.47%

For the purposes of the charts above, we have taken the point of the implementation of cooling measures to be on 1Q2010, with the introduction of SSD for residential property and land sold within one year of purchase, as well as the

reduction in LTV from 90% to 80% on all housing loans except HDB loans, which were both implemented in February 2010. Source: MAS, URA, Data.gov.sg, DBS

Note: Median change in price indices is based on q-o-q price changes; median is used instead of average given the presence of outliers as seen from the spikes in q-o-q changes for both private and HDB resale price indices.


Figure 27. Property markets have largely stabilised after the implementation of cooling measures

Figure 28. Stable q-o-q changes in price indices post cooling measures

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33

Furthermore, the potential upside from property investments may look even less attractive if one takes into consideration the cost of ownership. Currently, the average one-off cost i.e., transaction cost for equities approximate to 0.38%10, a stark contrast to that of properties at >15%. As a result of the cooling measures, the one-off cost to be incurred by a Singapore citizen buying a second residential property worth S$1.5m can work up to a whopping S$227,350 today! That’s not all. There are also other recurring costs such as interest costs, monthly maintenance fees, property insurance as well as repair and refurbishment costs which are omitted from the calculation in Figure 29, which could further limit the upside of holding a second property.

As such, given the slowdown in property prices and material one-off costs limiting the upside of property returns in recent decades, merely holding properties may not be sufficient for you. In fact, you may find it beneficial to complement your portfolio with other asset classes such as equities, REITs, etc.

Property and leverage – An unbeatable combo?Fervent property supporters would argue that the attractive long-term returns of properties would ultimately justify the hefty one-off costs incurred at the initial stage of investment. Furthermore, together with leverage, property returns are often said to be unbeatable. To study if the claim is true, this section seeks to compare the returns of property versus equities, whilst incorporating the cost of ownership and effects of leverage onto property returns. We will refer to multiple on invested capital (MOIC) for our analysis.

Cost of ownership eating into potential

upside from property investments

Amount (S$) (%)

Buyer stamp duty 44,600 2.97%

Additional buyer stamp duty 180,000 12%

Legal fees* 2,400 0.16%

Valuation fee* 350 0.02%

Total 227,350 15.16%

Figure 29. One-off cost for a Singapore citizen buying a second residential property worth S$1.5m

*estimatesSource: IRAS, DBS

Would you buy a stock if you knew that it would decline by more than 15% in value the next moment?

10 Includes average trading fee (assuming <S$50k per trade), CDP clearing fee and SGX trading fee


MOIC is calculated by taking the ending investment value, divided by the initial cash outlay that is invested. For example, for a private property valued at S$1.5m at 1Q2009, assuming a maximum 75% LTV for a private bank loan at S$1.125m, this would mean a cash injection of S$375,000. Additionally, we will also include BSD and ABSD (where relevant) to capture the total cash outlay for the property purchase. For example, for a S$1.5m first private property purchased in 1Q2009, we assume a BSD11

of S$44,600 with no ABSD12, which brings total cash outlay of S$419,600. MOIC is then calculated based on the final investment value at 1Q2021, divided by the initial cash outlay of S$419,600. MOIC is used as a metric as it enables us to consider the effects of leverage in one’s investment through a smaller initial cash outlay that is needed for the investment. The higher the MOIC, the more attractive the investment is based on its absolute return basis.

Our analysis will assume the following key assumptions:

• Investment horizon of 1Q2009-1Q2021, with 1Q2009 as the base year

• Maximum LTV for properties, with a fixed interest rate of 1.8% and loan tenure of 20 years

• No leverage for equities and REITs

• One-off transaction costs for properties and equities e.g., BSD, ABSD, transaction costs

• Rental yield of 3%, with a monthly maintenance fee for properties

• Property tax

Based on our analysis, the returns of equities and REITs still looks relatively compelling even after assuming maximum leverage for properties. Based on Figure 30, S&P500 and S-REITs showed the highest growth in invested capital, followed by private property (first property) and then HDB property (first property). More specifically, for every S$100 invested, one can receive S$635 from S&P500 Index and S$486 from S- REITs, versus S$399 for a private property and S$339 for an HDB. Out of the different asset classes, investing in a second private property performed the worst, with a return of a mere S$209 per S$100 invested which significantly falls short of equities.

Returns of equities and REITs are more

compelling even after assuming maximum

leverage for properties

11 BSD rates before 20 February 2018 are as follows: 1% for the first S$180,000 of purchase price/market price of property, 2% for the next S$180,000 and the remaining amount to be subjected to 3%. BSD rates have been adjusted starting 20 February 2018, with rates for residential properties as follows: 1% for first S$180,000, 2% for next S$180,000, 3% for next S$640,000 and lastly, 4% for remaining value. Source: IRAS

12 ABSD rates for a second residential property are at 7% from 12 January 2013 to 5 July 2018, and 12% on/after 8 July 2018. Source: IRAS


35

Figure 30. Growth in invested capital of property versus other asset classes

0

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i.e. Base)

Quarter & Year

STI S-REIT S&P500 China

Hong Kong HDB (1st Property) Private (1st Property) Private (2nd Property)

S&P500: $635

S-REIT: $486

Private (1st): $399

HDB (1st): $339Hong Kong:

$316

STI: $280

China: $274

Private (2nd): $209

STI S-REIT S&P500 China Hong Kong HDB (1st Property)

Private (1st Property)

Private (2nd

Property)Multiple on Invested Capital

2.80x 4.86x 6.35x 2.74x 3.16x 3.39x 3.99x 2.09x

Note: Investment returns are based on a time horizon of 1Q2009 to 1Q2021. Excludes repair/refurbishment cost, legal

fees, insurance costs, and SSD. Assumes purchase is by a Singapore citizen. MOIC refers to an investment’s current value to the amount of cash/money an investor incurs at the starting point.

Source: Bloomberg L.P., DBS Bank

Equity & REITs: • Transaction cost of 0.38%• No leverage

1st Property (HDB):• Property value of S$500k• BSD of S$9.6k• Property tax of S$1.5k• Rental yield of 3%• Maintenance fee of

S$300/month• 75% LTV, 1.8% interest

rate p.a., tenure of 20 years

1st Property (Private):• Property value of S$1.5m• BSD of S$44.6k • Property tax of S$4.65k

before 1 January 2015, S$4.8k after 1 January 2015

• Rental yield of 3%• Maintenance fee of



2nd Property (Private):• Property value of S$1.5m• BSD of S$44.6k and ABSD

of S$180k• Property tax of S$4.65k

before 1 January 2015, S$4.8k after 1 January 2015

• Rental yield of 3%• Maintenance fee of




$-

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HDB (1stProperty)

Hong Kong STI China Private (2ndProperty)

Growth in Invested Capital (Base =

S$500k in invested capital)

This is mainly attributed to the significant one-off transaction costs involved, i.e., ABSD costs plus the 45% cap on its LTV, which limits the upside of a second property investment. As ABSD increases further with the number of properties one owns and as the maximum allowable LTV declines for the third and fourth bank loan, the MOIC of a third and fourth property can be expected to be even lower than that of a second property. Our analysis did not take into consideration the practice of decoupling of property as a means to avoid the ABSD, which will likely result in a higher MOIC given the lower one-off transaction fees and higher LTV. Regardless, our analysis shows that apart from properties, there are also other asset classes such as S&P500 and S-REITs that offer compelling returns for investors.

Thinking of a second property? Think twice

Our findings show that properties become less compelling as an asset class beyond one’s first home. If you are looking to grow your nest egg for retirement, investing in an additional property may not be the wisest choice. Across all asset classes, investing in a second property generates the lowest growth in invested capital (Figure 31).

Furthermore, some may also find the returns from property may not be sufficient, especially at lower debt levels. Our analysis assumes a 75% LTV for both private (first property) and HDB (first property); LTVs lower than those rates would inevitably generate a lower MOIC. For example, private and HDB properties with an LTV of 45% would generate a mere MOIC of 2.09-2.52x and 2.21x, respectively, making properties the weakest performing asset out of all the asset classes in relative terms based on our findings (Figure 32).

Figure 31. Growth in net worth (Base = S$500k in invested capital)

Note: Investment returns are based on a time horizon of 1Q2009 to 1Q2021. Source: Bloomberg L.P., DBS Bank

If you had invested S$500k into equities and REITs in early 2009, your net worth could amount up to S$3.2m today, versus S$1.0m invested in a second private property.

Why more isn’t always the best

Growth in Invested Capital (Base = S$500k in invested capital)


37

However, we would like to caution homeowners against gearing up in a bid to bump up their property returns. Additional leverage would undoubtedly expose homeowners to greater mortgage obligations and financing risks, which would place them under greater financial stress especially when interest rates increase. Investors should weigh the trade-offs between further potential upside versus any increased financial stressors that would come with greater leverage. For investors who are seeking returns without the financial stressors that come with leverage, our findings show that other asset classes can also look attractive.

Other considerations

There are also other factors investors need to consider before investing in a physical property as outlined in Figure 33.

Figure 32. Returns of properties wane with declining LTV

6.35x4.86x

3.16x 2.80x 2.74x1.74x 1.92x 1.72x

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S&P500 S-REIT Hong Kong STI China HDB Private (1st) Private (2nd)

Multiple on Invested Capital (x)

75% LTV 65% LTV 55% LTV 45% LTV No leverage

S&P500 S-REIT Hong Kong

STI China HDB Private (1st)

Private (2nd)

No leverage

6.35x 4.86x 3.16x 2.80x 2.74x 1.74x 1.92x 1.72x

75% LTV N/A N/A N/A N/A N/A 3.39x 3.99x N/A



45% LTV N/A N/A N/A N/A N/A 2.21x 2.52x 2.09x

Note: N/A refers to not applicable. For private (second property), the maximum allowable LTV is at 45%. Investment returns

are based on a time horizon of 1Q2009 to 1Q2021. Source: Bloomberg L.P., DBS Bank

Caution! Beware of leverage

Multiple on Invested Capital (x)


AFC Dot.com

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Unemployment Rate (Resident) versus Private Property Price Index

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Out of the considerations identified above, liquidity is especially important to investors. In addition, property prices tend to decline more sharply during economic downturns, especially when residential unemployment rates exceed 4.0%. The COVID-19 pandemic was the only exception, with the other four market downturns experiencing sharp declines in property prices (Figure 34). However, it is during these economic downturns where liquidity matters the most.

Figure 33. Factors to consider when investing in physical properties

S&P500 S-REIT Hong Kong

STI China HDB Private (1st)

Private (2nd)

No leverage

6.35x 4.86x 3.16x 2.80x 2.74x 1.74x 1.92x 1.72x




45% LTV N/A N/A N/A N/A N/A 2.21x 2.52x 2.09x

Note: Unemployment rates (%) are seasonally adjustedSource: SingStat, CEIC, DBS

Don’t overlook the importance of liquidity

Figure 34. Property prices tend to decline more sharply when unemployment rates exceed 4.0%


39

1. Liquidity Property assets are typically less liquid relative to other asset classes.

2. Property gains may be subjected to one-off costs

Property gains may be subjected to SSD when disposed within the holding period. Other financial assets are typically not subjected to one-off costs on their capital gains.

3. Time and effort Time and effort are usually needed to manage tenants, and operational and maintenance matters. Other asset classes such as REITs depend on professional management and can be a more passive form of real estate investing.

4. Yields Some financial assets e.g., REITS and dividend-paying stocks also generate attractive yield levels for investors, which at times can be even more attractive than the rental yields generated from physical properties.

5. Greater diversification The capital needed to invest in other financial assets is typically smaller, which enables the investor to pursue greater portfolio diversification.

Furthermore, some financial assets also provide direct exposure into diversified portfolios e.g., ETF indices provide diversification into a basket of securities, some REITs invest across a range of industrials, logistics and office space assets, and more.

Importance of diversificationOverall, you should also look beyond your property and consider other asset classes such as equities and REITs to build a more diversified nest egg. As our findings have shown, simply relying on property assets may no longer be sufficient for attaining our financial goals. It is imperative to seek diversified sources of returns across other asset classes such as equities, REITs and more, to build a solid nest egg.

However, a significant portion of total household sector assets still lies in property, based on the latest available SingStat data (Figure 35). On an aggregate basis, property assets make up close to 42% of the total household sector assets, while shares & securities only make up approximately 9%. Whilst it is of no surprise that property assets make up the largest proportion of household sector assets, financial assets in shares and securities are at significantly low levels, even relative to currency & deposits and life insurance at an estimated 20% and 10%, respectively. The latest trends in household sector assets illustrate that there is still plenty of room for diversification in one’s investments to build a more diversified nest egg.

Simply relying on property assets may no longer be sufficient for attaining our financial goals.

Currency & Deposits

19.9%

Shares & Securities

9.2%

Life Insurance

10.1%

Central Provident Fund (CPF)18.5%

Pension Funds0.6%

Property41.7% Household

AssetsSGD 2,622

Billions

51.9%49.6%

41.7%

19.9%

18.5%

10.1%9.2%

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Year Pension Funds Shares & Securi ties

Li fe Insurance Central Provident Fund (CPF)

Currency & Deposits Property

Note: Household sector is defined as all household institutional units that have engaged in economic activities

in Singapore for at least a year, including Singapore citizens, permanent residents, foreigners, and unincorporated

enterprises (e.g., sole proprietorships). Source: SingStat, DBS

Figure 35. Household sector assets breakdown (2Q2021)


However, we find that individuals have a relatively low propensity to invest, especially among the middle-aged, across all income groups (Figure 37)13. Based on the percentage share of DBS retail customers with investment holdings, it is evident that the 35-44 and 45-54 age groups experience the lowest propensity to invest across all income groups, relative to other age groups (with the exception of age 65 & above).

Figure 36. Household sector balance sheet

SGD Billion Dollars 2021 2Q 2011 2Q 2001 2Q 1995 2Q

Household Sector Net Worth 2,295 1,243 552 448

Assets 2,622 1,468 695 515

Financial Assets 1,530 740 334 210

Currency & Deposits 523 258 117 83

Shares & Securities 241 161 77 46

Life Insurance 264 110 37 10

Central Provident Fund (CPF) 485 198 90 62

Pension Funds 17 13 13 10

Residential Property Assets 1,093 728 361 305

Public Housing 487 368 193 136

Private Housing 606 360 167 170

Liabilities 327 224 142 67

Mortgage Loans 247 166 105 42

Financial Institutions 208 124 44 23

Housing & Development Board (HDB) 39 42 61 19

Personal Loans 81 58 38 25

Motor Vehicle 11 15 14 9

Credit/Charge Cards 10 7 3 1

Others 60 37 21 15

Many middle-aged individuals are not

investing

13 Kindly refer to DBS Asian Insights report “Same storm, different boat: Impact of COVID-19 on financial wellness of Singapore” dated 18 Aug 2020.



41

0%

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25- 34 35 - 44 45 - 54 55 - 64 65 and above

$2999 & below $3000 to $4999 $5000 to $6999

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$7000 to $9999 $10000 and above

Furthermore, we saw in Figure 23 (see “Mortgage-to-income ratios, by age and income groups”) that it is also the middle-aged group that showcased the highest exposure to mortgage liabilities. Through this, we can infer that instead of channelling their savings into retirement and investments, many individuals in the middle-age group are setting aside savings to meet their mortgage liabilities instead.

Given that retirement is near for many, especially for those in the 45-54 age group, the relatively low levels of investments and relatively high levels of mortgage liabilities may hinder them from reaching their retirement goals.

We find that customers are more likely to invest when they use DBS NAV Planner. As we can see from Figure 37, with the help of DBS NAV Planner, a digital financial and retirement advisory tool on DBS’ platform, customers across most age and income groups are more likely to invest. Customers who invest more actively will be better positioned to grow their net worth.

For individuals new to financial planning and investing, consider tools such as DBS NAV Planner. DBS NAV Planner can be accessed via DBS digibank Mobile Application and is an intuitive digital tool which brings together everything from income, cash, CPF savings, property and investments, expenses, and loans and more under one platform, which helps to provide users with a holistic view of one’s net worth.

Figure 37. % share of retail and DBS NAV Planner customers with investments, by age group and income

% share of retail customers with investments % share of DBS NAV Planner customers with investments

Source: DBS Bank

Active investors are better positioned to

grow their net worth


You can also consider tapping on DBS Insights Direct, a new research platform to sift out undervalued stocks and emerging trends when building your investment portfolio. If you are unsure where to start, look at the equity picks across markets in Singapore, Hong Kong/China, Thailand, and Indonesia to kickstart your journey to build a more diversified nest egg, above and beyond property assets.

Try Insights Direct on Mobile Now!


43

https://www.dbs.com/insightsdirect/

With longer life expectancies and rising healthcare costs, Singaporeans are beginning to realise their nest eggs may no longer be sufficient to last them through their retirement years.

A Financial Planning Attitudes Survey conducted by MoneySense in 2017 showed evidence of misconceptions among Singaporeans with regard to the opportune time to start their financial planning, as well as uncertainties about how best to go about it. For instance, 1 in 5 feel they only need to start financial planning when they are looking to retire. Additionally, only 1 in 5 people believe they are knowledgeable about investing. A 2020 parliamentary reply concluded more must be done to raise the level of financial literacy among Singaporeans.

For many Singaporeans, property forms a significant part of their retirement nest egg. In fact, property ownership is top of mind for many Singaporeans, especially when it comes to building wealth and in the search for a steady stream of passive income. For individuals with portfolios heavily reliant on properties, they typically rely on rental income and property appreciation for returns. However, what may have worked for our parents may no longer be sufficient for us going forward given the government’s cooling measures.

It is important to view your property as a part of your overall financial plan. Diversification is key to portfolio management. Holding a variety of assets can help to manage the downside risk that a single security or asset class can have on one’s overall returns. The right mix of assets – for example, equities, bonds, REITs, alternatives, CPF/SRS savings, and cash – can help to maximize one’s portfolio risk-reward. Speak to a wealth planning manager to get the right asset allocation that is best suited to your risk profile and needs.

To build a diversified and sustainable nest egg, consider your property in relation to other asset classes. Besides affordability, other factors to consider include home loan repayment quantum and tenure, inflation, liquidity, and the potential income pay-outs from other investments.

With technology, investing in asset classes beyond one’s property has increasingly become more convenient and cost effective, so you can get started earlier with less. Make time your ally and prioritise planning for longer-term goals. Doing so will enable

Growing a diversified nest egg for your financial future

Diversification is key to portfolio management

Start investing now to reap the power of

compounding


you to reap the power of compounding. There is a wide range of low-cost options at your fingertips – in approach (such as via regular savings plans and robo-advisers) and in products (such as equities, exchange-traded funds) – to help you achieve financial wellness without depending solely on property.

The COVID-19 pandemic served as a wake-up call for us to take a hard look at our finances. DBS has made concerted efforts to motivate and empower the public with various financial education programmes, such as DBS NAV University and partnerships with the CPF Board, SGX (FLY programme), the Singapore University of Social Sciences, schools, People’s Association, and more.

The bank’s multi-pronged approach includes DBS NAV Planner (a digital financial advisory and retirement tool), a wide range of insurance and investment products, a nation-wide financial education game BINGO for our customers, as well as an in-house annual Financial Planning Challenge to raise the bar for DBS’ dedicated team of wealth planning managers. Underlining our approach is the DBS Financial Planning Framework, which places top priority on holistic financial planning.

Since its launch in April 2020, more than 2.4m customers have been engaged with the DBS NAV Planner. We have found that NAV Planner users generally invest greater sums of capital in a year – at about S$7,500 – which is more than double the amount invested by an average retail customer at S$3,000.

Holistic financial planning through DBS NAV PlannerThe path to wealth accumulation involves building positive cashflows, which can then be channelled into suitable investments aligned to one’s objectives, risk profiles and investment horizons. Remember: Holistic financial planning is more than just an investing idea or strategy.

Advanced digital advisory tools, such as the DBS NAV Planner, offer building blocks that empower customers to build comprehensive financial plans to navigate one’s life journey with confidence. It encompasses a customised budget with saving/spending targets, aids to identify and close one’s insurance and investing gaps, plans for one’s home, integration of multiple money streams and more.

With DBS NAV Planner, one would be able to gain access to holistic financial planning at his/her fingertips, complemented with personalised tips and insights. Say goodbye to excel spreadsheets and to worries that may come from potentially missing out on information from various sources like CPF, HDB, IRAS and multiple bank accounts. Relevant information related to one’s finances can now be consolidated into one application with DBS NAV Planner, which provides greater convenience and clarity to users.

Holding a variety of assets can help to manage the downside risk that a single security or asset class can have on one’s overall returns.


45

Here are 12 key financial planning considerations.

1. Do you have a realistic budget that keeps track of your saving and spend targets?

2. Do you have enough emergency savings?

3. What are your insurance needs?

4. Are there any existing insurance gaps and how do you close these gaps?

5. Is your money working hard enough for you?

Use DBS NAV Planner for your wealth planning needs

Emergency Savings

Protection

Investments

Money in & Money out

Tracks spending categories for a better understanding of your money inflows and outflows

Map Your Money (Retirement & Goals)

Integrates CPF, SRS Rules, Cashflow Projections of different money streams with goal simulation, connecting

Ideas for you (personalised)

Suggestions on how to improve your finacial wellbeing

Assets & Liabilities

A summary snapshot of your assets at a specific period


6. What are the suitable investments that are aligned to your objectives, risk profile and investment horizon?

7. How do you fund your children’s tertiary education?

8. How do you get the most out of your home?

9. With a longer lifespan and higher inflation rates, do you have sufficient income streams to tide you through your retirement?

10. What tax savings can you enjoy?

11. How do you ensure the financial security of your loved ones in the event of unforeseen circumstances?

12. How do you ensure a smooth distribution of your assets in the event of unforeseen circumstances?

Discovering investment ideas through DBS Insights DirectMake more informed investing decisions by using Insights Direct, an easy-to-use research platform where one can access award-winning and in-depth analysis of more than 500 stocks across Singapore, Hong Kong, China, Indonesia, and Thailand.

After all, securing your financial future is not just about working hard, it is also about working smart. With Insights Direct, investing is now easier with these interactive features:

• Investment Themes - With a new top idea or more a day, discover our best trading ideas from undervalued stocks, sectoral trends to thematic ideas – all consolidated in one spot for your easy viewing.

• Equity Picks - Not sure where to begin? Check out our regional equity picks. Closely watched by our regional strategists, our selection of stocks gets updated as and when news breaks or technical charts show a change.

• Stock Screener - Interested to gain exposure to a sector but unsure which stocks look good? Use this tool to sieve out buy calls, compare dividend yields and stocks’ potential total returns.

• Watchlist - Identified a stock you’re interested in or holding? Set up a watchlist for a quick reference of your stock holding.


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Access top ideas on Insights Direct

Stock screener feature


Monetising your home for retirementOther than providing a roof over your head, one’s strategy with his/her residential property can influence one’s nest egg and quality of life during those golden years.

Here are 5 things to consider when retiring with a property on hand.

1. Be free from home loan liabilities

Besides being a big-ticket item, mortgage is a long-term financial commitment that typically lasts between 20 and 35 years. As such, there’s a need to manage your property as part of your retirement planning. One strategy is to pay off your mortgage before reaching the retirement age. You can redeem your mortgage when you have a significant sum of idle cash e.g., annual bonuses, windfall.

2. Renting out your property for income

You can consider renting out a room, or the entire unit to enjoy rental income (if you have an alternative place to stay) for your retirement. Do bear in mind the time/effort/capital needed to manage tenants, operations, and maintenance, as well as the

Watchlist feature


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possibility of fluctuating rental income streams over the years. Additionally, if you are living with strangers, there is also the likely trade off in privacy and convenience.

3. Downsizing

You can consider downsizing your current home by selling it and buying a smaller property which reduces the upkeeping costs. This is especially applicable if your children are no longer living under the same roof as you. The surplus from the sales proceeds can go a long way to fund your retirement lifestyle. To stretch your nest egg, you can make it work harder by investing in suitable investments.

4. Government schemes – Lease Buyback and Silver Housing Bonus

There are government schemes that can help you unlock the value of your HDB flat to supplement your retirement income. For instance, under the Lease Buyback Scheme (LBS), you can sell part of your flat’s lease to HDB and choose to retain the length of lease based on the age of the youngest owner. Part of the sales proceeds will be used to top up your CPF Retirement Account to the CPF Full Retirement Sum ($186,000 in 2021). Doing so will enable you to receive higher monthly pay outs from the national annuity scheme CPF LIFE, for as long as you live.

Under the Silver Housing Bonus (SHB), when you sell your property (either HDB or private), you will receive a bonus if you choose to buy a 3-room or smaller flat. Conditions apply for both schemes.

5. DBS Home Equity Income Loan

If you own a private home and are between the age of 65 to 79, you can consider the DBS Home Equity Income Loan as an avenue to unlock some cash while remaining in your home.

If you are a Singapore citizen or PR, the DBS Home Equity Income Loan allows you to borrow against your fully paid private residential property to top up your CPF Retirement Sums which will be used for the CPF LIFE scheme. This will result in higher monthly pay-outs for life to supplement your retirement funds.

Here are some key features:

• No monthly loan repayments, with the loan amount and accrued interest payable only at loan maturity


• Fixed interest rate of 2.88% p.a. throughout the loan tenure

• Loan tenure of up to 30 years – till you (or the youngest borrower in the case of a joint loan) reaches age 95

• Flexibility to sell the property anytime, and repay the loan with no penalty

• The minimum loan amount would be the amount needed for you to top-up your CPF savings to meet the Full Retirement Sum for your cohort

• The maximum amount that can be borrowed is the amount required to top-up to the prevailing CPF Enhanced Retirement Sum (S$279,000 in 2021)

Simply relying on property assets may no longer be sufficient in attaining our financial goals. It is imperative to seek diversified sources of returns across other asset classes such as equities, REITs and more, in building a solid nest egg.


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Disclaimers and Important Notices

The information herein is published by DBS Bank Ltd (the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee.

The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof.

The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies.

The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.


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