Current and future supply and demand of homes in Singapore
Today, we will address a concern that many of you might have: Will Singapore properties’ prices, and hence the cost of purchasing a home continue to increase? And will there be an oversupply of properties in the future? To answer these concerns, we must first understand what is our current population, the projected population growth, as well as the current and future market of private properties in Singapore.
#1: Population in Singapore
1.1 Current Population, and the issues
As of 2021, Singapore’s population is estimated to be around 5.6 million, and as seen from the infographic above, the projected population in 2030 is expected to be 6.9 million.
So you might be wondering: how exactly will this expected population growth affect me? Well, this is significant because if we do not learn to grow as a nation, our aging population will be unable to sustain our economy by 2030.
1.2 Solutions
Now that we realise the risk of an unsustainable economy, we have to understand the solutions to this issue to minimise and solve this issue.
Solutions:
1. Huge increase in tax
As seen from parliament discussions, such as by DPM Heng, raising taxes is inevitable and will occur in the near future. As such, you can see that this solution of increasing tax is already in the process of being implemented.
2. The immigration of foreign talents
To immigrate foreign talents, we will first require infrastructure, followed by land for residential. Thus, more properties will be developed to serve the growing population, to ensure our economy remains sustainable in the future. Indication of the rise of properties will be discussed in the next point.
#2: Increase in properties’ development in Singapore
The increasing developments of properties can be seen from the 2019 URA Masterplan. As shown above, the 2019 URA Masterplan indicates that a new cross island MRT line will be finished by 2029, which suggests the prediction of significantly more commuters and hence properties and people living nearby.
Other examples in the 2019 URA Masterplan includes the shifting of Paya Lebar airbase for the new development of townships, and the shifting of Pasir Panjang Port for the future Greater South Waterfront.
Apart from Paya Lebar and Pasir Panjang, other areas in Singapore are also expected to have future developments. For instance, Bayshore Town blueprint, Kallang riverside for 4000 new homes, completion of Jurong innovation district, Punggol digital district, Dover knowledge district and among the several other locations being developed.
All these examples highlight how Singapore is developing more properties to serve the expected population growth. In the next point, we will discuss about the current housing situation in Singapore, and what it means for you.
#3: Housing situation in Singapore
3.1 Housing situation context
As seen from the infographic above, there is around 78.6% of the population staying in public housing or HDB currently, a decrease from 10 years ago where 83.6% stayed in HDB. So why is this significant? This highlights that there is a stronger demand to stay in a private residential unit. In fact, the current housing situation stands at approximately 350,000 private properties for every 1 million HDB homes.
As a whole, we have 1.35 million homes for a population of 5.6 million. That is a ratio of 1 : 4.1. Assuming we continue to maintain this ratio of 1 : 4.1, we would hence require to have at least 320,000 more new houses. So what does this mean for us?
3.2 Housing situation
1. Family size and affordability issue
As seen from the diagram above, the average household size has decreased over the past 10 years, and it is still continuing with this decreasing trend. This is a significant problem as affordability becomes an issue. There is also a rising demand for higher standards of living, and practical household size ratio will drop to 1:3.
Hence, the important takeaway is that family sizes are progressively getting smaller, and people now prefer a 1-2 bedroom rather than a 3-4 bedroom due to family size and affordability.
2. Housing situation VS. Population growth
As seen from the line graph above (circled part), despite the slower population growth rate, the household growth instead has a significant spike. This indicates that although population growth may be slower, the demand for residential households will still increase by 3-4 times.
In fact, let’s take a look at the stats by Singstat above. You will realise that that the number of resident households grew from 2.7% to 1.33 million in 2018 and is steady increasing.
So what does this years of high household means? Simply put, property prices will increase.
This trend is not unique for Singapore, instead it is actually similar with other major capital cities trends such as New York, London, Hong Kong and several others.
In reality, the actual figure should be 430,000 new homes are needed by 2030.
#4: Projection for properties in Singapore
As we have understood from previous sections, there is an increasing population, and increasing number of properties. Where specifically, there is an annual projection stock of 15,000 new private properties and 15,000 new HDBs per year in the next 13 years. This also means that we are only getting 390,000 homes up till 2030.
Due to the government rulings, new citizens are unable to absorb the HDBs. Hence, they must go for the private property option.
Although the government tries to reduce new supply by using cooling measures, it is still, unfortunately, heading towards an imbalance situation.
Projecting ahead, with the demand of private property mainly driven by the influx of new residents, the expected supply is simply not enough to cater for the future demand of the 6.9 million population of Singaporeans.
So, the golden question: What does this entail? Well, it means that there will be higher prices of properties, since the demand will be more than the supply.
Today, we simply looked at the demand and supply of homes in Singapore for the next 10 years. Stay tuned to the next article in the second instalment where we study the current Singaporeans’ income and affordability.