Ageing population key to direction of property market

National Development Minister Lawrence Wong says the future of Singapore’s property market is not dependent on cooling measures but rather on the overall state of the economy (“Economic health, not cooling measures, the ‘key issue’ for S’pore property”; April 22).

The key issue is that the country remains a successful global city with a thriving economy over the next 10 to 20 years.

While a growing economy is important, however, so are other factors for the property market’s growth. These include household income growth, population growth and demographic trends, which will impact the direction of our property market.

Singapore is projected to have the fastest ageing population in the world. Some 600,000 residents will be above the age of 65 by 2020, and the number of elderly citizens will be 900,000 by 2030.

The ageing demographic may outpace population growth, which will affect housing demand adversely. Amid this unfavourable situation, a supply-demand imbalance as we are now experiencing will exacerbate the property market’s woes.

Japan is one country where a declining population and ageing households have weighed heavily on housing prices. Its home prices are at roughly half the peak prices in 1990. Singapore’s property market should avoid the Japanese scenario.

To be successful, it is imperative that buyers and investors purchase during the right part of the real estate cycle and take a long-term investment view. Generally, property investments take five to 10 years for capital appreciation to be maximised.