An ageing population is not a problem for the private homes market

SINGAPORE’S population is rapidly ageing – could an ageing population be a major headwind for the private homes market?

The median age of Singapore residents rose from 37.4 years in mid-2010 to 42.1 years in mid-2022. Around 16.6 per cent of the resident population is aged 65 years and over in mid-2022, versus about 9 per cent in mid-2010.

While rising home loan rates could be a passing threat, what may hurt home prices in the longer term is a potential fall in demand as the population ages. If many people stop working as they age, income levels and the ability to fund upgrading of homes fall.

Downgrading one’s home, as in selling an owner-occupied home and replacing it with a less pricey one, may be a growing trend with an ageing population. Think of people who move from large landed homes to condominiums, or from freehold to older leasehold private homes, or from private homes to Housing and Development Board (HDB) homes, or from large HDB flats to smaller ones.

Such moves make sense. Often, paper gains on the appreciation of a long-held home are realised. Downgrading frees up cash to be invested in high quality bonds or dividend paying equities that generate payouts of a few per cent per annum to help fund retirement needs. Staying in an HDB home instead of a private one typically results in paying much lower monthly management fees.

Downgraders help contribute to a vibrant housing market. Some people who move from private to HDB homes may zero in on certain choice resale units and pay top dollar for them, which in turn benefits those who sell their HDB homes and buy a private home. 

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Private homeowners will need to wait out 15 months after selling their private homes before they can buy a non-subsidised HDB resale flat. This wait-out period does not apply to people aged 55 and above who are moving from a private home to a four-room or smaller HDB resale flat. 

Also, some older persons may be fine buying a leasehold home with say 30 years of land lease outstanding, as they will not outlive the land lease tenure. This in turn improves the liquidity for older leasehold homes.

Independent and income-earning

Critically, an ageing population does not translate into much weaker demand for homes because more of the elderly may seek to live independently and are still income-earning.     

One or two-person resident households, headed by an older person, are a fast-growing demographic. Resident households comprising a married household reference person, who is aged 65 years and over, and a spouse grew by 162 per cent between 2010 and 2021. Over the same period, the number of one-person resident households with a person aged 65 years and older grew by 131 per cent, while the number of resident households grew by 21.4 per cent. 

Possibly, as homes get smarter and older people get more adept with using technology, many older people may be better able to live on their own. Savvy entrepreneurs could offer more services to cater to the rising number of elderly who live independently.

The labour force participation rate among residents aged 65 years and over grew from 17.6 per cent at mid-2010 to 32.1 per cent at mid-2022 – faster than the growth in the labour force participation rate from 66.2 per cent to 70 per cent among residents aged 15 years and over. Between mid-2010 and mid-2021, the labour force participation rate among residents aged 75 years and over more than doubled from 5.4 per cent to 11.8 per cent.

Effective Jul 1, 2022, the retirement age and re-employment age in Singapore rose from 62 to 63 years and from 67 to 68 years respectively. The retirement age and re-employment age will rise further to 65 years and 70 years respectively by 2030. With a tight labour market and tailoring of work conditions to better suit older workers, expect higher labour force participation rate among the elderly.

Quality healthcare and safety

Many places in Asia, including nearby destinations, offer much cheaper alternatives to live out one’s golden years. The pitch from those selling homes overseas can be for a Singaporean to sell his home here, buy a bigger place overseas, enjoy a cash windfall from such an exercise and live in a place where one’s money stretches much further.

But even for older Singaporeans, who stop working, the pull of moving overseas may not be strong. Some may have children who work here as job prospects for young adults are relatively bright, and hence want to live here to be close to family members. Many older folk may choose to live in Singapore because they value the access to the high quality and affordable public healthcare system.

For wealthy elderly persons, whether locals or foreigners, living in Singapore can be desirable because of the good infrastructure, political stability, high-quality healthcare and high level of public safety. Some wealthy older folk may in fact want to invest more in their homes here because they spend more time at home as they age and seek a high-quality sanctuary to live out the golden years.

Megatrends such as greater adoption of remote working, growth of online retail, and climate change are challenging property developers and landlords to offer spaces that meet the evolving needs of users. Add to that an ageing population, but one with older persons who are possibly fairly active and wealthy. 

A future-ready housing developer may want to cater to potential home buyers in their 70s or 80s, who are looking for homes that are easy to move around in and offer the flexibility to work-from-home. Living in an integrated development, where one can easily access groceries, food, banking services and medical facilities, could be alluring to older homeowners who stop driving. Also, some of the elderly may prefer new homes to avoid the hassle of renovating an older unit.

Instead of spelling peril for the private homes market, an ageing population can offer rich pickings for developers who are able to meet the needs of the growing ranks of the affluent elderly.