AUGUST 7, 2018
Property is Singaporeans’ number one investment. It’s so hot that if the government has to impose another cooling measure, it will probably involve spraying property buyers with a fire hose; and even that may not disperse the crowd at a showflat. But how did property become arguably the #1 the Singaporean dream? As we approach the nation’s 53rd birthday, we look at the method behind the madness:

A nation of home-owners
Over 90% of Singaporeans own their homes today (although most of these are public housing in the form of HDB flats). That was part and parcel of the late Founding Prime Minister Lee Kuan Yew’s vision — he surmised, probably correctly, that citizens would feel they have a bigger sense of belonging in a country if they owned their homes.

Property ownership – at least the home where you stay in – is quite simply the norm in Singaporean families. That alone is a powerful social driver that compels people to buy a house. But what about property as an investment?

That fascination comes from many different factors, but chief among them are:

Singapore’s property boom and the previous generation
Simplicity, in an increasingly complex investment environment
The use of CPF monies
Singapore’s property boom and the previous generation
In 1970, a typical four-room flat in an HDB New Town location would have cost around $12,500. By 2010, the price of such a flat would have been around $260,000. As of 2018, four-room flats (before subsidies) are reaching the $320,000+ mark.

As for private housing, take a look at property prices from 1976 to the present:

If you take a look at Singapore’s wealthiest people today, four of the top 10 made their wealth through real estate, and one more billionaire (Choo Chong Ngen) made his wealth through hotels, which is somewhat related.

The point we’re making here is that, during its great leap to first world status, Singapore real estate saw mind-blowing gains. The numbers can seem surreal at times, and if you had started investing in property from even the early 1990s, odds are you’d be sitting on a few million dollars by now.

This is why Singapore’s older generation keeps drilling the “property message” into today’s youth — our parents grew up in an environment where they saw property prices just go up, and up, and up.

Older Singaporeans who invested in stocks, businesses, gold, etc. are likely to tell their children to focus on the property instead, as most of them saw their investment choices get beaten out in terms of gains.

As a result, many Singaporeans — who are now in their 20s and 30s — have grown up with an ingrained belief in the property. Some even try to buy shoebox units before HDB flats, with the absolute confidence that they can be rented out or sold for gains.

This belief creates a self-fulfilling prophecy in our property market: property values continue to go up because Singaporeans believe they will, and Singaporeans believe it because they keep seeing property prices go up.

This has become a fundamental factor to property becoming the #1 Singaporean dream that no amount of cooling measures — or statistics — can dislodge.

[Recommended article: This Sengkang BTO project made more profit than The Pinnacle @ Duxton]

Simplicity, in an increasingly complex investment environment
Every year that passes, we see more sophisticated investment products. Hedge funds, unit trust funds, Investment Linked Policies, Indexed funds, synthetic versus partial replication ETFs, reverse ETFs, zero coupon bond funds, etc.

The growing sophistry is an advantage – if you’re in the group of people who can make sense of it. But for many Singaporeans, property stands out from these products because of how straightforward it is:

You buy a house, you rent it out, you get money.

Regardless of one’s level of financial literacy, just about everyone can understand that. And Singaporeans, being a conservative bunch, prefer to invest in things they (think) they understand.

It doesn’t help that the global financial crisis in 2008 triggered situations such as the minibonds saga, which creates further distrust of “paper products” in investing.

Mind you, this also means that many Singaporeans grossly oversimplify property investments. But perceived simplicity is very attractive; and it will get more attractive as financial products continue to get more convoluted.

Singaporean dream landlord
Every Singaporean has imagined himself as the landlord one time or another.

The use of CPF monies
There’s a certain mindset that Singaporeans have, with regard to their CPF money. Many feel it’s cash they can’t ‘touch’ anyway, so it’s as good as not being there.

However, CPF monies can be used to buy both HDB and private properties in Singapore, subject to a withdrawal limit. As such, there’s less psychological “sting” in using CPF monies to buy a house – not when making the 10 to 25% down payment, and not even for the monthly repayments that come straight from their Ordinary Account (OA).

This “free money” mentality isn’t true of all Singaporeans, of course – but it does make the property dream seem much more affordable, to those who have sufficient CPF savings. This explains lack of hesitation in trying for a bigger house, or rushing for the latest Executive Condominium — in the process pushing the boundaries of what they can afford to loan.

[Recommended article: Total Debt Servicing Ratio (TDSR): 7 Key Points to Know]

Some 82% of Singaporeans live in public property. The simplest way to distinguish yourself is to be in the privileged minority who can afford a condo.

This is about FACE more than getting to enjoy condo facilities like the pool or the BBQ pit. Due to the whole “meritocracy” argument, it’s not uncommon for many Singaporeans to attach a moral dimension to affluence.

It’s a common belief that if you study hard, work hard, and are responsible and ambitious, affluence is a natural outcome. As such, owning private property can be read as a statement that you’re more diligent, are more intelligent, hungrier for success, etc.

It’s not always bragging — many Singaporeans seek to prove the point to no one except themselves. But it does a lot to keep the property market afloat, since one of the most definite things we’ll buy after getting rich is private property.

We don’t just see private property as just a ticket to wealth, we also see it as a mark of personal accomplishment. And that’s why it’s a big part of the dream: we’re not buying a house, we’re buying reassurance that we’ve lived the best way we can.