Abstract
AbstractHome equity represents a substantial share of retirement wealth for many older persons, particularly in Asia where national housing policies have encouraged home-ownership. This paper explored the potential for reverse mortgages to help ‘asset-rich and cash-poor’ older Singaporeans unlock their home equity while ageing in place. The empirical analysis was based on a nationally representative survey of home-owners age 50+ in the 2018 Singapore Life Panel (N = 6,258). Our analyses showed that the average older home-owner holds some 60 per cent of total net wealth in housing equity, suggestive of high demand potential for reverse mortgage products. Nevertheless, actual interest in such products was much below potential demand. Only one in four older home-owners indicated interest in commercial reverse mortgages if these were to become available; a larger majority had never heard of the financial product. Interest in reverse mortgages was positively associated with product awareness and self-rated product understanding. This implies that a critical step towards building consumer interest would be to enhance awareness of such products and simplify related contract terms. Having a mortgage, fewer children, financial literacy and preparedness for retirement were also positively associated with interest level. These results have implications for targeted interventions to enhance consumer awareness and spur interest in reverse mortgages, especially in ageing societies where older people have built up substantial equity through the housing market over time.
Highlights
In most developed nations, older persons tend to have home equity even if they have few liquid assets
Singapore is a land-scarce country with a large public housing programme known as the Housing Development Board (HDB)
Unlike public housing meant for lower-income households in other countries, HDB housing provides options for a range of socio-economic classes
Summary
Older persons tend to have home equity even if they have few liquid assets. Singapore is a land-scarce country with a large public housing programme known as the Housing Development Board (HDB). Over 80 per cent of the total population lives in HDB housing (HDB, 2018), most of which consists of high-rise flats on state-owned land; these are planned, built and allocated by the government. They are located in high-density housing estates which are self-contained satellite towns with schools, supermarkets, clinics, food centres as well as recreational facilities. Private housing in Singapore accounts for about 20 per cent of the total housing stock and, subject to certain conditions, HDB home-owners may invest in private properties (Phang, 2018). Over the past several decades, both public and private housing prices have experienced significant appreciation (Chia et al, 2017)
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