2 Reasons Why Property Investing Is Not What It Used To Be In Singapore

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Let's talk about why property investing in Singapore is no longer what it used to be and why you should not rely on it in the long term for your retirement.

The reason why I am not a fan of residential property investing, in particular, getting a second property for your wealth accumulation or passive income, is due to the long-term demographic headwinds that will result in an oversupply of HDB resale properties thereby causing both properties and rental prices to remain depressed.

This can be explained in two points.

Firstly, in terms of supply, Singapore will eventually face a situation of oversupply of HDB resale properties as the baby boomer generation passes on while leaving behind their HDB flats with a remaining lease of around 40 to 60 years

As the HDB rule dictates, existing homeowners will be unable to inherit the properties that are left behind which will result in an influx of supply in the market thereby pushing prices down.

Even if the law were to be changed to allow ownership of 2 HDBs, the natural cause of action is for people to stay in 1 HDB and rent out the other thereby causing the rental market to be depressed.

Secondly, in terms of demand, given that Singapore’s fertility rate is falling, it is only natural that the local demand for residential property would be on a natural decline.

The solution to the demand problem can be easily resolved by bringing in additional foreigners but that by itself does seem unlikely as it is not politically favourable.

As such, even if the supply situation is to remain as it is today, with demand falling naturally, inevitably, prices will slowly come back down.

That said, if we were to combine both the demand and supply situation of Singapore’s residential market in the next 25 to 30 years, I find it unlikely that investors can continue to enjoy the returns that they had enjoyed in investing in property in the last 3 decades.

This is why I do not think that investors should rely on Singapore’s residential market as a wealth-accumulating or income-generating instrument, a better instrument would be REITs if you so choose to consider adding property exposure to your portfolio.

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