Singapore property prices peaked in 2021, and the Additional Buyer’s Stamp Duty (ABSD) has raised doubts about whether property is a worthwhile investment.
Whether you are a landlord or an owner-investor, it’s clear that the current real estate market is no longer in the accumulation period of 2009 to 2013, and it’s also different from the “golden era” of Singapore’s transformation into a first-world country.
However, it is worth noting that there are several key factors that can ensure your property can still serve as a retirement asset.
1. You must know the role your property will play in retirement
One point cannot be ignored: not all properties serve the same purpose.
To give a specific example, let’s say you buy a walk-up apartment with 60 years remaining on the lease for S$800,000 (older leasehold properties can potentially be cheaper).
You can rent out this apartment for S$3,000 a month, generating an above-average gross rental yield of 4.5%.
The average gross rental yield for most residential properties is between 2% and 3%, so the yield you’re getting is significantly higher.
But is this a good retirement asset?
If the rent is not meant to supplement your retirement and you hope to gain from a resale, then this is not a good investment choice.
This is because when you want to resell the apartment 20 years later, buyers are unlikely to get bank loan approval for your old property.
Alternatively, what if you bought a new property for S$1.4 million but could still only get S$3,000 a month in rent?
In this case, the rental yield is not as attractive, at around 2.5%; but being a new property, it has the potential for higher resale gains because it won’t be too old even if you sell it in 20 years.
We can also consider a third scenario: you might not care about the final resale gains.
In that case, you could use your accumulated savings to buy a very old walk-up apartment in full (with no loan) as you approach retirement.
Assuming you are around 65 when you make this decision, you could receive S$3,000 in rental income every month for the rest of your life.
You need to have a clear idea of your property’s purpose before you can decide if it’s a retirement asset.
2. You know how to monetize the property without downgrading or selling it
For many Singaporeans, retirement involves selling their original house and downgrading to a smaller one. However, this is not a viable option for everyone.
In such cases, you need to ensure there are ways to monetize your property after retirement. Owning a million-dollar condo with no income can be a painful situation.
Sometimes, homebuyers plan to rent out their homes after retirement, so they might look for dual-key units that can be split into two sub-units. This allows them to rent out a portion of the property while maintaining their privacy. Another possibility for those who are financially well-off is to keep their HDB flat after the five-year Minimum Occupation Period and then purchase a second property.
Although this will incur additional Buyer’s Stamp Duty, it does allow them to live in the condo while renting out the entire HDB flat. If they want more rental income, they can also live in their HDB flat while renting out the condo.
Besides these, there are other financing schemes and options, such as using a reverse mortgage to supplement your CPF (currently only offered by DBS Bank), and HDB’s Lease Buyback Scheme (LBS).
If you plan to use these schemes, make sure they align with quantifiable retirement goals. For example, if you rent out the other half of your dual-key unit, will it meet your desired Income Replacement Rate (IRR)?
Related questions should be discussed with a financial professional, combined with data or projections from real estate professionals.
3. The lease decay is not significant
For long-term property investment, freehold properties are more likely to command a higher premium.
Once a lease has 60 years or less remaining, buyers may not be able to obtain a full loan. Once the lease drops to 30 years or less, it becomes impossible for buyers to purchase the property with a bank loan.
CPF cannot be used to purchase HDB flats with a remaining lease of 20 years or less.
Since buyers cannot get adequate financing, they will have to pay in full with cash. From this perspective, you are very likely to sell the property with little or no profit.
As an aside, keep in mind that as a lease nears its end, property owners have little incentive to upgrade or maintain common facilities, which is evident in dilapidated, strata-titled shopping malls. When only a few decades are left on the lease, many residents are unwilling to increase maintenance fees to fix old facilities and upgrade landscaped areas.
4. Avoid buying niche properties with limited appeal
A good example of a niche property is a one-bedroom unit under 500 square feet (also known as a shoebox unit).
These types of properties are well-suited for specific purposes, such as an initial choice for a novice investor or for a landlord seeking rental income from a specific tenant pool (e.g., students from a nearby university, or single expatriate workers on short-term stays).
However, if you are considering resale gains, such as eventually selling the one-bedroom unit to fund your retirement, these properties may carry greater risk. Because one-bedroom units are too small for families, some typical buyers, including HDB upgraders, may not be interested in them.
Similarly, properties like walk-up apartments or boutique condos built in land enclaves (often far from amenities) may be harder to resell. These properties might be popular when you buy them, but they may fall out of favor decades later.
Of course, this is not the case for all such properties; but generally, if you hope for higher resale gains later, it’s best to stick to investing in properties with broad appeal, which means adhering to the fundamentals, such as having convenient transport links and schools nearby.
5. You should be able to pay off your home loan before age 55
If you are still carrying a home loan after age 55, the property is more likely to become a liability rather than an asset.
Furthermore, it’s quite disheartening to reach the age for CPF withdrawal only to find you can only get S$5,000. This means the bulk of your CPF savings will still be tied up in paying off the home loan.
As most financial advisors point out, advancing age brings the risk of reduced income. Layoffs or re-employment at a lower salary are real situations many people face as they get older. If you are forced to sell your property in a bad market close to retirement, you will face severe financial losses.
It also becomes harder to secure loan opportunities and schemes at lower interest rates as you age. Therefore, while you can maintain your CPF Ordinary Account (CPF OA) after 55, it is more sensible and prudent to have paid off your home loan by then.
6. If your property has co-owners, they need to agree to the resale plan
In Singapore, it’s not uncommon for a property to have co-owners; many people co-own properties with family members such as a spouse, daughter, son, or daughter-in-law.
If you intend to use the property as a retirement asset, you must ensure that the other co-owners understand your intentions. Otherwise, conflicts may arise between you and them over whether to resell the property.
For example, suppose you plan to sell your condo at age 65 to fund your retirement. If your child is a co-owner of the property but you haven’t communicated this properly, problems will arise when you’re ready to sell.
For instance, if your child agrees to the sale, they cannot apply for a Build-To-Order (BTO) flat for 30 months, meaning they can only buy a more expensive resale flat or rent for over two years.
At the same time, you might also disagree on whether “now is the best time to sell.” You might not care about higher returns and just want to meet your retirement goals, but the other co-owners of your house may have higher targets than you.
All the issues mentioned above could lead to your “retirement asset” remaining unsold for a long time after you intend to sell; or sometimes it might be sold before you plan to (to achieve their own goals, your co-owners might push for a sale).
7. The property is part of the retirement plan, not the entire plan
If the price of the property is so high that you cannot afford to invest in anything else, it may not be a good retirement asset.
If you have nothing besides this property (e.g., all CPF savings are used up, no stocks or bonds, no endowment plans, etc.), you are placing an all-or-nothing bet on its future value or rental prospects. This isn’t really a “retirement asset,” but a risky real estate gamble.
As a retirement asset, it’s best to ensure the property is just one part of your financial plan, not the entire plan.
Ultimately, investing in real estate at the wrong time can be a costly decision. In fact, you might retire during the most inopportune time in the property cycle, as this is something very difficult to predict.
If the property is your only retirement investment, you may be forced to sell it during a property market downturn, which could even result in a loss.
Of course, you could also wait for the property market to recover before selling to make a profit. But this could be a long wait, and when it comes to retirement, it’s a delay you likely can’t afford.
While we believe real estate is a worthwhile investment asset class, a degree of balance and diversification remains important. Buying within your means and maintaining a cautious approach will give you sufficient holding power to weather any downturns in the property market.
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