Housing affordability is predicted to worsen as enduring WFH arrangements force homeowners to buy larger homes, and price-to-income ratios achieve multi-year highs.
The latest research by DBS showed that investing in property for retirement funds is no longer as financially stable as before, reported Singapore Business Review (SBR).
This comes as housing affordability is forecasted to worsen due to work-from-home arrangements, which leaves homeowners little choice but to opt for bigger homes. Additionally, price-to-income ratios are expected to hit multi-year highs.
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The research found that the pace of growth of property prices has outrun that of salary and gross domestic product (GDP). In the past, this means purchasing smaller homes with higher prices on a per sq ft (psf) basis.
But with the work-from-home arrangements, this means a shift to bigger houses, with more households embracing dual incomes to achieve more financial flexibility.
Moreover, a changing demographic is expected to affect the overall demand for residential properties. Factors such as tighter manpower policies and an ageing population are predicted to affect the expected rental yield and longer-term demand for homes.
Certain groups of consumers were found to be facing challenges in retirement planning and housing affordability.
The DBS data indicates that those earning a monthly income of up to $5,999 and those within the 30 to 49 age group are the most stretched. Based on the research, this age group also has the lowest propensity to invest.
On the other hand, private property owners within the 30 to 39 and 40 to 49 age groups were found to have higher mortgage-to-income ratios. Those in the 30 to 39 age group had an average ratio of 0.27, or 19% to 46%. In comparison, those in the 40 to 49 bracket had an average ratio of 0.26, or 19% to 39%.
With high acquisition costs making property less attractive, DBS advised consumers to focus on increasing their net worth with a diversified investment portfolio.
“While consumers can regard their primary property as a retirement asset and a component of a holistic financial plan, they should keep in mind that diversification is key and the right mix of assets can help to maximise the risk-reward from their investments,” said Lorna Tan, Head of Financial Planning Literacy at DBS Bank, as quoted by SBR.
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Cheryl Chiew, Digital Content Specialist at PropertyGuru, edited this story. To contact her about this story, email: cheryl@propertyguru.com.sg.
