1.Let us look at the WHY?
Straits Times reported on 30th January 2013 Singapore needs to boost its population to 6.9 million.
Straits Times Population Article dated on 30 Jan 2013
The reason is obvious as we need to have a stronger Old-Age Support Ratio. Currently in year 2015 our Old-Age Support ratio is 1 : 4.9. This means every citizen age 65 years old or above has 4.9 working citizen age between 20-64 years old.
If assume we are not going to have new immigrant intake and current birthrate remains unchanged, our Old-Age Support Ratio by year 2030 will be 1 : 2.1. This is definitely no good if allow to happen. Therefore Singapore definitely needs to hit or get close to 6.9 million population by 2030.
Old-Age Support Ratio Chart
2. Where is the NEEDS?
Based on Department Of Statistics in year 2014 Singapore population is 5.47 million. To hit 6.9 million population, there a shortfall of 1.43 million. Basically, we need to increase our population by 95,333 yearly for the next 15 years in order to achieve 6.9 million population in 2030.
The simplest way to calculate the number of new houses we need to accommodate for that extra 1.43 million population is to use the linear calculation method. Let us assume each household size is 3.5 persons, by 2030 we will need around 408,571 houses ( 1.43 million divided by 3.5 persons). So basically every year we need around 27,238 new houses.
But in reality, we all know a lot of factors can affect the population growth. To simplify the calculations, we will use only Household Size, Resident Total Fertility Rate (TFR) and Government Policy.
( i ) Household Size
For condominium household size we can safely assume at 3.5 persons per household based on Population Trends 2014 report.
( ii ) Resident Total Fertility Rate (TFR)
Based on Singapore Registration Of Births and Deaths 2013 report statistics, we can assume yearly natural increase in population is around 20,000 residents. If we use the 80%/20% rule, assume 20% of these residents are staying in condominiums, that will workout to 4,000 residents per year. The number of new houses needed is 1,143 per year.
( iii ) Government Policy
Let us assume our government stick to their current foreigner policy until 2030, which I think there a good chance the foreigner policy will change, Singapore will increase foreigners intake in the near future once constraints on housing and transportation we are facing right now have improved.
From Population Trends 2014 report, Singapore population increased 86,600 from 2012 to 2013, and 70,500 from 2013 to 2014. Therefore it is fair for us to take the average figure of 78,550 as our yearly population increment, and it is more or less closed to the figure (95,333) we calculated using linear calculation method.
If we deduct the natural population increase of 20,000, every year Singapore need to allow or take in 58,550 foreigners (78,550 – 20,000). Due to foreigners are not allowed to purchase HDB flat, and Singaporeans and Permanent Residents are only allowed to purchase one HDB flat for own stay, therefore the number of foreigners going to rent HDB flat is very small. However, we need to take into consideration a big portion of the foreigners are Work Permit holders, so to assume 50% or 29,275 of foreigners going to stay in condominium looks fair. This will work out to 8,364 new houses needed for foreigners and 1,143 new houses from natural increase population. We can conclude Singapore needs to add 9,507 new houses yearly. By 2030 we will need a total of 142,605 new houses.
Population Growth Chart
3. Why need to buy now?
( i ) Many times we hear buyers will say ” I can wait “, ” I am not in a hurry to buy now and let us wait for property prices to fall farther before we want to commit” , etc.
But history has shown that properties new high price always get higher than previous highs, and the properties new low price also get higher than the previous lows. So it is highly unlikely price will fall to the previous low level even if buyers continue to wait.
( ii ) From the chart below we can see there a surge in land supplies during 2010 to 2012 compare to preceding years. After 2012 the supply of land is regulated and by 2015, the supply is reduced almost 4 times compare to the peak of 2011.
Government Land Sales GFA Chart
Based on chart above, we know the land supply is being regulated after 2012, and from two charts below, we can conclude by 2019 the total number of new houses is going to be less than 90,000 units. From our calculation in 2 ( iii ), by 2030 we need around 142,605 new houses. Therefore, there is still a shortage 58% of new houses.
Government Land Sales Estimated units Chart
Yearly Complete Expectation Chart
( iii ) When supply increase and demand decrease, property price will decreases, which you can see from the chart below, from 2004 to 2007 the land supply had increased and property price index started to decrease from 2008Q1 until 2009Q1.
However when supply decrease and demand increase, property price will increase. From 2007 to 2009, the land supply was drastically reduced and population had grown from 4,588,599 in 2007 to 5,399,162 in 2013 ( an increase of 810,563). We witnessed the property price index climbed from 2009Q1 to 2013Q1.
If our population is around 5,469,724 now and we need 6,900,000 by year 2030, the population difference is 1.43 million. Who is to say that property price will not increase by 2030 looking at current statistic on supply and demand.
Therefore I feel it is a good time to buy now, if you have the extra resources, base on current market sentiment, serious sellers are willing to lower their asking price and more willing to negotiate when there an offer. As for developers also have priced their property to sell, a good example is High Park Residences, and let see how The Brownstone’s developer price their units during their launch on this coming 25th July 2015.
Land supply vs Property Circle Chart
2000 to 2014 Singapore Population Chart
Current Population : 5,470,000
Target Population : 6,900,000
Needed Population : 1,430,000
Yearly Population : 95,333 (needed until 2030 to hits 1.43m)
Adjusted Population : 29,275 (take into consideration of Government Policy & 50% reduction)
Natural Inc. Population : 4,000 (assume 20% stay private property)
Yearly Cal. Population : 33,275
Household Size : 3.5 persons
Needed New Houses : 9,507 Houses (yearly)
Total Needed New Houses : 142,605 Houses ( until 2030)
Current Supply till 2019 : 90,000 Houses
Shortage : 52,605 Houses ( or 58.45%)