Can Singaporeans afford luxury homes?

43 years. That is the number of years that an average Singapore resident needs to pay for a luxury home in the city-state.
(It takes the average Singapore resident more than half his lifetime to afford a
luxury home in his country. Image courtesy of Thinkstock.)
The figure was revealed in a recent Bloomberg report about the growing disparity between incomes and housing prices in emerging markets. The report, which compared national income averages against the prices of homes in prime locations, concluded that Mumbai was the world’s least affordable home market. Singapore placed last among the 14 countries ranked, behind other Asian cities like Jakarta (61.7 years), Bangkok (67) and Hong Kong (96.4).
In Singapore, a typical piece of luxury property spanning 100 sq m (about 1,076 sq ft) costs about US $2.71 million (S$3.38 million)—roughly 43 times the nation’s average annual income. This means that at average price of S$3,149 per sq ft, a luxury home here would require an average resident with a typical per-capita purchasing power of US$59,900 (S$74,679) more than half his life to pay off.
Calculations were based on property consultancy firm Knight Frank’s housing index, which compiled information from 63 different housing markets, as well as the US Central Intelligence Agency (CIA) World Factbook’s gross domestic product (GDP) per capita estimates for 2011.
The GDP per capita estimates are based on the per capita purchasing power parity of each country, which compares how much money is needed in each country to buy similar baskets of goods and services.
CIA World Factbook estimates put Singapore’s 2011 per capita purchasing power at around US$59,900 (S$74,679); while Knight Frank’s Wealth Report 2011, released earlier this month, revealed that prices of Singapore’s luxury home segment has reached US$27,100 per sq m (S$3,149 per sq ft) as of last year.
In other words, a prime location property in Singapore costs about 43 times the city-state’s average annual income. Based on the average Singaporean life expectancy of 81.3 years (based on World Bank statistics), the average Singapore resident could be paying for his luxury home for more than half his life. This is, of course, not taking into account other costs of living like utility bills and daily expenses.
Speaking to Bloomberg of the findings, head of residential research at Knight Frank Liam Bailey noted that it is not unusual for developing countries to experience such disparities in wealth. He said, “There are big differences in wealth levels in emerging markets compared to the developed world, which is part of the course for economic development. In the first phase of growth some people make big fortunes, it takes time for this to trickle down as the middle class develop and generate their own wealth.”
While Singapore may not be the anywhere near the ten most expensive luxury home segments in the world, we could be well on our way there. The Wealth Report 2011, compiled by Citi Private Bank and Knight Frank, revealed that the country’s luxury housing segment charted an 18% price growth—the third largest hike of the year.
However, the fact remains that over 80% of the Singaporean population still live in public housing. Most homebuyers have to take out housing loans to fund their purchases, and tolerance for surging home prices—even those not in the luxury home segment—are thinning.
These observations suggest a growing income gap between Singapore’s middle-class and ultra-rich, and that Singapore still has a long way to go before the majority of its residents can splurge on luxury homes.