Gap between condo prices and household income highest since 2010

Victor Kang17 Mar 2021


Known as the “affordability ratio”, the gap between household income and prices of new condominium sold is at its biggest in 10 years.

Singapore saw the gap between household income and prices of private non-landed homes widen in 2020, reported The Business Times (BT).

Known as the “affordability ratio”, the gap between household income and prices of new condominium sold is at its biggest in 10 years, showed BT’s analysis of data from Colliers International, Knight Frank, Urban Redevelopment Authority, OrangeTee & Tie and Department of Statistics (DOS).

BT said the analysis used median property prices covering all land tenures and locations within Singapore and excludes executive condominiums (ECs). To get the prices, BT used the methodology utilised by Knight Frank which involves multiplying the median per sq ft (psf) price by 1,000 sq ft.

The median annual household income, on the other hand, is derived from “multiplying the median monthly household income from work including employer CPF contributions by 12”, said BT.

BT noted that this price-to-income ratio is one of the affordability indicators that has been brought to the fore amid market speculation that the government may roll-out new cooling measures this year.

“To be clear, the price-to-income ratio for new sales has been rising consecutively since 2016,” said the report.

“But in a year of COVID-19, the 2020 ratio stands out as it captures the first decline in household income in over a decade.”

BT pointed to DOS figures which showed that Singapore’s median monthly household income from work fell 2.5% year-on-year to $9,189 last year. Despite this, prices of private non-landed homes are now above the all-time peak in Q3 2013, according to Colliers data.

Some of the factors spurring the private housing market include the demand from HDB upgraders, availability of cheap debt, and the pandemic’s uneven impact on sectors. This comes even as consumers meet existing regulations to deter over-leverage.

With a high ratio suggesting households would have to stretch their finances to acquire a property, Derek Tan, DBS Group Research Analyst, said the increasing affordability ratio is “certainly something to look out for”.

“This sparks the question of retirement adequacy, especially if one finances the majority of a property purchase with CPF savings,” he said as quoted by BT.

In 2020, the price-to-income ratio for new sales of private non-landed homes rose to 15.4 from 2019’s 14.7, assuming a 1,000 sq ft unit.

That means a household has to save for at least 15.4 years to be able to purchase a new condo unit. The ratio stood at 15.9 in 2010, which was the last decade-high.

The same data reveals that the price-to-income ratio for resales remains largely stable, inching up from 11.1 in 2019 to 11.2 in 2020. This comes as median prices for new condos increased last year, while resale condos registered a drop in prices.

BT conducted more checks by calculating prices based on absolute median quantums – instead of psf prices with an assumed size of 1,000 sq ft – against median household incomes.

“This showed just two straight years of an increasing “affordability ratio” for new sales, though 2020’s ratio of 12.1 grew more significantly over 2019 than the year prior. This ratio is now at its highest since 2010’s 14.8,” said BT.

But while median psf prices for all private home sales increased 50% in 2010 to 2020, median absolute prices rose by just 24%, said Colliers Research Head Tricia Song. Median incomes expanded 45% in this time.

The slightly different scenes showed by the two data sets could reflect a skew from the demand for smaller units, which come with higher psf price but lower absolute quantums.

Excluding ECs, private properties account for 25% to 26% of all Singapore’s residential stock. As such, private homes are mainly accessible to the top 30% of earners, said analysts.

If computed using the average top 30% household incomes from work per year, the price-to-income ratio for new condo sales based on median psf prices has increased for the well-heeled since 2010. In fact, the gap between prices of new condo and the highest 30% of household incomes stood at its widest in more than a decade in 2020, with a ratio of 6.3.

For resale condos, the “affordability ratio” for the top 30% earners remained stable at 4.6 since 2018.

The scenario also indicates the widening price gap between resale and new condos, which Song expects to “probably balance itself in time to come”, with either new sales prices dropping or resale prices increasing.

BT explained that its analysis for the household income data captures only Singaporeans and permanent residents (PRs), whereas the property price data covers foreigners.

Sing Tien Foo, Director at the Institute of Real Estate and Urban Studies at NUS, observed that foreign property buyers may pay a slight premium compared to locals.

Leonard Tay, Research Head at Knight Frank Singapore, said the affordability trend, reflecting the pandemic’s impact, may not be of concern if it is confined only to 2020 as well as the first half of 2021.

This is because the affordability ratio is not the sole indicator of the market’s strength. Income for work, for instance, is not the only source of household capital, said Tay.

According to him, at least two generations of Singaporeans have benefited from asset appreciation due to the city-state’s economic development in the past five decades. And savings amassed by baby boomers as well as the Generation X may have been used to fund their children’s home aspirations.

Given the ultra-low interest rate environment, other factors that have to be looked into include the household debt-servicing ration, projected housing supply, household debt as a percentage of assets, and forecast income growth rate, said Song.

DBS’s Tan also pointed to the market’s level of sub-sales, which remains low for now, as another thing to consider.

Capital inflows from abroad and COVID-19’s uneven impact on sectors should also be considered. Barclays Economist Brian Tan said investment demand from Singaporeans that were less affected by the pandemic economically was likely a driver of last year’s home prices.

Christine Sun, Senior Vice-President of Research and Analytics at OrangeTee and Tie, believes a wait-and-see approach may be apt since the economy is still recovering and that any cooling measures may affect other sectors like banking and construction. And if the city-state’s gross domestic product “substantially” increases in Q1 2021, the property price growth may not be a major issue, she said.

Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this story, email:

Manfred Ting
Mar 18, 2021
There were less than 80 units out of over 1million HDB sold above $1 million in 2020. The probability of such transactions happening is like striking 4-D first prize 10 times. Specifically, to argue that this is a factor leading to higher property prices is misplaced. By the way, it's likely that more units will be sold above $1m in future, however, this shouldn't come as a surprise given that the cost of buying a 5-room in mature estate can be as high as almost $700,000. Hence, selling above $1m is not a tall order, nor a lottery effect.
tay yp
Mar 18, 2021
its not earned income fueling t low end condos sale , enbloc n million dollars HDB flats sold , 2nd generation wealth.. thus this article lacks depth.

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