DBS Bank has said that having more than one property may not be the best bet as a retirement investment for Singaporeans.
Its research report ‘NAV Financial Health Series’ found some segments of the Singapore population are overstretching themselves when buying a new private property, which may no longer be something that they can solely rely on as their retirement nest egg.
The bank said it is also expected that housing affordability will worsen once homeowners trade up to a bigger home, likely necessitated by work-from-home arrangements as a result of the pandemic, and price-to-income ratios will eventually hit multi-year highs.
Property is a major contributor to household wealth, accounting for nearly 42% of total household assets in Singapore. Buoyed by strong economic growth in the earlier years, it worked well as a wealth accumulation strategy for older generations, as many homeowners had seen the value of their homes and property investments appreciate by multiple folds.
But DBS said it might no longer be sufficient, nor cost-effective, for younger Singaporeans to solely depend on the returns of property investments to accumulate wealth for their golden years. Several factors, such as property prices potentially outpacing one’s salary growth and evolving demographics, now weigh on home price appreciation.
Derek Tan, head of property research, DBS Bank said: “By studying publicly available data, as well as aggregated and anonymised data insights from 1.2 million of our retail customers, we were able to diagnose that one’s ability to retire well would be negatively impacted if one adheres to the adage of property being a ‘golden nest egg’ given shifting demographics.
“Instead, we found several investment alternatives which have comparable, if not superior, returns that a retail investor can consider as part of maintaining a well-diversified investment portfolio.”
