Private housing market not affected by an ageing population

SINGAPORE’S population is ageing rapidly and this could this be a major obstacle for the market of private homes?

Singapore’s median age rose from 37.4 to 42.1, or 42.1, years at mid-2022. In mid-2022, 16.6% of the population will be 65 or older compared to only 9% in mid-2010.

The rise in home loan rates may be temporary, but a possible fall in demand due to the aging population could hurt home prices over the long term. As people age, their incomes and ability to upgrade homes will fall.

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With an ageing population, downgrading a home by selling it and replacing with something less expensive may be on the rise. Consider people who are moving from a large landed home to a condominium, from leased private homes to freehold, from rented private homes to HDB homes or smaller HDB flats.

These moves are logical. Oft, gains are made on paper from the appreciation of an older home. The cash you save by downgrading can be used to invest in high-quality bonds or dividend-paying equities, which will generate annual payouts of about a few percent to fund your retirement. HDB homes are typically cheaper to manage than private ones.

The housing market is boosted by downgraders. Some people moving from HDB to private homes will pay top dollar for certain resale homes. This benefits those who are selling their HDB home and buying a private one.

After selling their private home, homeowners must wait 15 months before purchasing a nonsubsidised HDB flat. The 15-month wait period does not apply for people 55 years and older who are moving to a smaller HDB flat or a 4-room HDB resale.

Some older people may also be able to buy a home that has a land lease of say 30 years remaining, since they won’t outlive the lease term. This improves the value of older leasehold properties.

The demand for housing is not affected by an ageing population because many older people are able to live independently, and still earn income.

As homes become smarter and people age, they may find it easier to live independently. Entrepreneurs could provide more services for the growing number of seniors who live independently.

A demographic that is rapidly growing is one or two-person households headed by older people. Between 2010 and 2021, the number of resident households that include a 65-year-old married person as a household reference and their spouse increased by 162 percent. In the same time period, resident households consisting of a single person and a 65-year-old person grew by 131%, while resident households increased by 21.4%.

The rate of participation in the labor force among those aged 65 and older grew faster than that among those aged 15 and over, which grew from 66.2% to 70%. The labour force participation rate for residents 75 and older has more than doubled between mid-2010 to mid-2021.

Singapore’s retirement and reemployment age will increase from 62 years to 63 and from 67 years to 68. By 2030, the retirement age and reemployment age will be raised to 65 and 70 respectively. Expect a higher rate of participation in the labour force among older workers due to a tighter labour market, and better tailored work conditions for older workers.

There are many places in Asia that offer cheaper options to retire. Some sellers of overseas homes will encourage Singaporeans to sell their home, purchase a larger place abroad, and enjoy the cash windfall. They also want them to live in a country where money is more flexible.

Even for Singaporeans who retire, the desire to move overseas is not always strong. Many Singaporeans may want to move here because they have family who live nearby. Some older people may want to live in Singapore to be close to their family members.

Singapore is a desirable place to live for wealthy older people, locals and foreigners alike, because of its good infrastructure, political stability, quality healthcare, and high public safety. Some older wealthy people may want to invest in their home here as they spend more and more time at the house.

Property developers and landlords are challenged to provide spaces that meet the changing needs of their tenants. Megatrends like remote working, online retail and climate change will challenge them. Then there is the ageing population that may be active and wealthy.

Future-ready housing developers may cater to home buyers in their 70s and 80s who want homes that are easy for them to move about in, but also offer flexibility to work from home. Older homeowners who have stopped driving may be attracted to living in an integrated community where they can easily access food, banking, medical services, and grocery stores. Some older homeowners may also prefer to buy new homes rather than renovate an older unit.

An ageing population is not necessarily a threat to the housing market. Instead, it can be a boon for developers who can meet the demands of an increasing number of wealthy seniors.

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