Chart of the Day: Singapore bucks trend of higher price-to-income ratio

It takes about five years to buy a home with disposable income in 2016.

This chart from DBS Equity Research shows Singapore’s price-to-income ratio has remained fairly consistent over the past few years at a range of 5.6-9.3x.

According to JLL, Singapore’s housing affordability has improved from 7.3x in 2010 to 4.8x in 2016. This means in 2016, it takes 4.8 or five years to afford the average price of a home.

This compares favourably with other regional cities like Hong Kong, London, San Francisco, Tokyo, and Sydney, which range between 8.5-18.1x.

Here's more from DBS Equity Research:

Using the price-to-income ratio for the 80th income percentile and 5-room HDB dwellers as proxies for upgrader demand show that the ratio is stable at 7.3x and 9.3x, respectively, similar to levels in 2003.

The ratio stands at 5.6x for condominium dwellers, one of the lowest since 2003. Even if prices increase by a 5% CAGR over 2018-2019, based on 2016 income levels, the price-to-income ratios remain reasonable.

While the regional comparison shows there is room for property prices in Singapore to rise, we note that the current price-to-income ratio is also close to 2003 levels, implying there is still scope for developers to raise prices before they become unaffordable. This is likely to come at the expense of average sizes.