SINGAPORE:

The ongoing debate about the primary drivers of Singapore's escalating housing demand continues, with analysts revealing that the aging population may play a more significant role than new citizens. According to Senior Minister Lee Hsien Loong, the country grants approximately 22,000 new citizenships annually, yet recent studies suggest nearly half of Singaporean households are now led by seniors aged 65 and above.

Aging Population: A Key Contributor to Housing Demand

Sky Seah, a senior lecturer at the National University of Singapore (NUS) Business School, emphasizes the critical impact of aging citizens on the housing market. With a headship rate of 52% for households aged 65 and above, it is clear that the desires and needs of older citizens are reshaping the housing landscape. More seniors are opting to live independently or inviting adult children back home, thereby increasing the demand for different housing types as they adapt after accumulating wealth.

Seah cites that household growth trends, which directly reflect housing demand, have varied significantly between 2009 and 2024, with annual increases ranging from 200 to a striking 47,100 households. This indicates a steady average household growth rate of about 1.85% per year, which correlates with changes in both population dynamics and housing needs.

New Citizens and Permanent Residents: A Steady Landscape

While new citizens are essential to Singapore's demographic fabric, data suggests their numbers remain relatively stable. The Department of Statistics indicates that around 25,200 new citizens were recorded in 2024, a slight increase from the previous years. Meanwhile, the number of new permanent residents (PRs) also hovers around 35,000.

It is vital to note that foreigners — those who wish to obtain citizenship — must first acquire PR status for a minimum of two years. Currently, PRs are subject to a 5% additional buyer's stamp duty when purchasing their initial home, which often leads them to secure properties soon after gaining PR status, rather than waiting for citizenship.

Local Demand: The Real Driving Force

According to industry experts, Singaporean citizens are the backbone of the housing market. Tricia Song from CBRE reported that February recorded the highest developer sales for a single month in 13 years, reflecting strong local demand. Lee Sze Teck of Huttons Asia highlighted that a staggering 92.4% of new home buyers are Singaporeans, while PRs account for only 6.9%, leaving a mere 0.7% for foreign buyers.

Singapore's deep-rooted culture of homeownership continues to foster robust local demand. Homeownership rates climbed to 90.8% in 2024, even as the ratio of Housing and Development Board (HDB) flat dwellers slightly declined from 77.8% to 77.4%. This trend hints at rising aspirations among residents to upgrade to private properties.

However, experts are cautious; they remind us that if population growth is primarily induced by non-residents, then rental demand may surge temporarily, especially given the challenges posed by inflation and high interest rates.

Concerns Over Affordability and Market Dynamics

Although there's a noticeable increase in housing supply potentially easing rent prices, the demand for property as an investment remains robust. Seah emphasizes that various factors — including inflation, government subsidies, mortgage rates, and unemployment levels — significantly impact housing demand. Currently, unemployment remains low between 2% and 3%, and while household incomes are expected to rise, global inflation rates and mortgage costs present challenges ahead.

Compounding the situation, younger households are experiencing declining headship rates, indicating potential affordability problems. Conversely, wealthier older families are likely to persist in driving demand. Experts warn that if home prices continue to rise rapidly, the government may have to implement measures to cool the market, which could have implications for sales and prices.

Despite volatility in the market, forces that favor private home demand persist, given strong household finances and low unemployment. However, projects that present good value — especially those located in prime areas — are expected to perform well, even amidst rising economic uncertainty.

The Core Central Region (CCR) has begun to feel the pinch after the introduction of a staggering 60% additional buyer's stamp duty on foreign purchases in April 2023, leading to an observable drop in foreign interest in non-landed sales within the CCR. Chia stressed that local and PR buyers are stepping up to fill the demand void where foreign buyers once thrived.

In summary

While new citizens undoubtedly contribute to Singapore's evolving demographic landscape, it is the aging population and strong local demand that are fundamentally shaping the housing market dynamics going forward. Keep an eye on this evolving story, as changes continue to unfold!