Singapore households’ net worth grows as residential asset values climb

Jun 15, 2022

MARKET watchers expect the total value of private homes and Housing Board (HDB) flats held by households to keep rising, albeit more slowly than before, and in turn further bolster household net worth.

Quarterly data on the household sector balance sheet, released by the Singapore Department of Statistics (Singstat), showed that the growth in residential assets has sped up over the past few quarters, amid a buoyant property market.

Household net worth – that is, assets less liabilities – climbed about 8.7 per cent year on year (yoy) to S$2.43 trillion as at the end of Q1 2022. This was a tad slower than the 10.2 per cent surge to S$2.39 trillion as at end-2021.

Total assets, which comprise financial assets and residential property assets, rose some 8.4 per cent yoy to S$2.79 trillion in Q1 2022, after a 9.8 per cent increase at the end of 2021.

This boost was partly driven by residential assets, which posted double-digit growth in both the final quarter of last year and the first quarter of this year. The value of all residential property assets held by Singapore households swelled 13.5 per cent yoy in Q4 2021, followed by a 10.4 per cent jump to S$1.18 trillion in Q1 2022.

Prior to that, residential properties on household balance sheets had posted just single-digit growth in recent years: about 4.6 per cent in Q4 2020 and 3.6 per cent in Q4 2019, for instance.

Private housing assets surged by 9.3 per cent yoy as at end-March 2022, while the value of HDB flats held by households grew 11.8 per cent from a year ago.

Edmund Tie head of research and consulting Lam Chern Woon said the 13.5 per cent growth in overall residential property assets by the end of 2021 “unsurprisingly mirrored the substantial pickup in property prices”.

Overall, private home prices leapt 10.6 per cent last year, with jumps of 13.3 per cent in the landed segment and 9.8 per cent in the non-landed segment. Similarly, the HDB resale price index climbed at a “blistering pace” of 12.7 per cent last year, Lam noted.

He highlighted that for both private and public housing in Singapore, such strong paces of growth had not been seen since 2010, when property markets were buoyed by the flood of monetary easing in the wake of the global financial crisis.

Alan Cheong, executive director of research and consultancy at Savills Singapore, suggested looking at liquid assets – derived by adding the current assets and Central Provident Fund (CPF) items in the balance sheet – which point to households’ ability to purchase private residential properties.

“After all, it is the amount of cash a potential homebuyer has to fork out to breach the minimum equity downpayment that matters,” he said.

Over the decades, liquid assets per household in Singapore have been rising faster than the Urban Redevelopment Authority’s price index for private residential property. In some way, this explains why property price increases are hard to suppress despite a litany of tightening measures to moderate demand, Cheong noted.

From Savills’ calculations, liquid assets per household in Q1 2022 grew 5.3 per cent yoy, and have, together with recent sharp rental increases, “easily overcome hitherto and future mortgage rate rises”, he said.

Meanwhile, the growth in household net assets buttresses the wealth effect, promoting expenditures which in turn generate economic multipliers that boost the balance sheet in the future.

“The rise in both household liquid and net assets should therefore provoke thought about whether private residential prices here are really out of sync with the overall household affordability levels,” Cheong he told The Business Times (BT).

He reckons that if household liquid and net assets continue to grow, they will lend support to private home prices.

However, the converse may not be true because housing prices are also dependent on other factors like inflation, sentiment and policies reining in overconsumption of such assets. The inflationary element can often be a positive aid to residential prices because real estate is generally seen as a hedge against it. And on the sentiment front, that is often driven by the performance of the equity markets and geopolitical events.

“So far, these have not inflected private property price increases, but the recent cryptocurrency crash and the emergence of bearish equity markets have heightened the risk of sentiment turning south,” Cheong noted.

Lee Nai Jia, deputy director of the Institute of Real Estate and Urban Studies, said the uptrend in the value of households’ residential assets will likely continue, although the increase could be slower than in 2021.

“While demand for homes is driven by wealth preservation motives and the fear of missing out, the higher interest rates and the already-high property prices are likely to temper expectations that prices can go higher as before,” he told BT.

That said, there may still be a net increase in demand and, correspondingly, in home prices, as the uncertainty in the economy could trigger individuals to shift their money to real estate, especially residential properties in Singapore, Dr Lee added.

Edmund Tie expects rising property prices to support the growth of residential property assets, albeit at a slower rate.

Lam said: “The fundamentals remain sound: wage inflation and ongoing household formation will continue to provide a bedrock of genuine household demand, while the opening of our borders will re-inject foreign buying demand.”

However, the tightening of the total debt servicing ratio, rising interest rates and higher living costs will weigh on housing affordability.

“Considering the economic and geopolitical headwinds, the growth of Singapore’s property market this year is likely to be capped, and we do not expect a repeat of the runaway prices of 2021,” Lam added.

The Singstat figures showed that residential properties made up some 42.5 per cent of household assets as at the end of Q1 2022.

The other 57.5 per cent were held in financial assets, which include currency and deposits; shares and securities; life insurance; CPF; and pension funds.

The value of household financial assets grew 6.9 per cent yoy in Q1 2022 to around S$1.6 trillion. It had gained 7.3 per cent as at the end of 2021, versus a year ago.

Meanwhile, Singapore households’ liabilities went up by nearly 6 per cent yoy to S$360.51 billion in the first quarter of this year, easing slightly from the 7.2 per cent jump in the fourth quarter last year.

Household liabilities comprise mortgage loans and personal loans, such as car loans and credit cards. Mortgage loans rose 5.1 per cent yoy in Q1 2022, roughly the same rate as the 5.07 per cent increase in the prior quarter.

Singstat’s household sector balance sheet data looks at all household institutional units that have engaged in economic activities in Singapore for at least a year, including Singapore citizens, permanent residents, foreigners and unincorporated enterprises (such as sole proprietorships).