Over the years, Singapore has been prospering economically.
Singapore households have benefited from this growth to accumulate fairly substantial net wealth in the form of financial and non-financial assets.
Data from the Singapore Department of Statistics (DOS) demonstrates this, as private properties long the domain of the rich is the biggest and most important component of household wealth in Singapore.
In addition to providing insight into what Singaporean households’ wealth looks like which will help you understand the concept of net worth better; there are some key personal finance lessons you can take away from this.
Here’s what you need to know.
TL;DR: Singapore Households Wealth
*CPF refers to the total amount due to members (net of withdrawals). Figures may not add up due to rounding.
Singapore Households Net Worth and Debt-to-Asset Ratio
FYI: Net worth is simply the difference between your assets (things you own) – your liabilities (things you owe).
Here are three simple steps to follow in order to calculate your net worth:
- List down all your assets
- List down all your liabilities
- Subtract liabilities from your assets to get your net worth
In absolute terms, Singapore households have increased their household net worth from $1,218 billion in Q1 2011 to $2,221 billion in Q1 2021 over 10 years.
This is a $1,003 billion or an 83 per cent increase in a decade which supports our country’s wealth growth narrative.
Singapore Household Assets Breakdown
But you might be thinking.
What is the wealth made up of and what assets do Singapore households hold?
As of Q1 2021, Singapore households are holding on to about $2,543.4 billion in assets.
|Variables||Percentage||Q1 2021 Assets (In Millions)|
|Household Net Worth (Assets - Liabilities)||-||2,220,976|
|Currency & Deposits||20.39%||518,596|
|Unit Trusts & Investment Funds||3.49%||88,830|
|Central Provident Fund (CPF)*||18.64%||473,974|
If Singapore households were an investor, he/she would likely be classified as a conservative investor. Let’s call him Singa for short.
Singa’s biggest holding is actually private housing (23.6%), with Singa holding onto about $601.3 billion worth of private property.
This is significant as, before Q4 2013, public housing was the biggest component of Singa’s investment portfolio.
|Q3 2013||Q4 2013|
|Public Housing||$421.15 billion||$412.75 billion|
|Private Housing||$415.74 billion||$415.66 billion|
This paradigm shift could mean that Singapore households have become more affluent to be able to afford more private property over the years.
The next biggest holding is currency and deposits (20.4%) which means Singa is holding on to about $518.6 billion in cash or cash equivalents.
FYI: According to the Organisation for Economic Co-operation and Development (OECD), currency and deposits are financial assets that are used to make payments or that may be included in money, broadly defined, consisting of currency, transferable deposits and other deposits. Transferable deposits comprise all deposits that are (a) exchangeable on demand at par, without penalty or restriction; (b) freely transferable by cheque or giro-order and (c) otherwise commonly used to make payments.
The next biggest holding in Singa’s portfolio is made up of Central Provident Fund (CPF) funds (18.6%) which has seen a 140.6% increase from Q1 2011 to Q1 2021.
This is closely followed by public housing (18.5%) which is likely to grow in the near future considering how the Housing and Development Board resale flat market is overheating.
And of course, life insurance makes up a good 9.8% of Singa’s portfolio.
Last but not least, Singa has invested about 4.8% of his portfolio in shares (listed and unlisted shares) compared to 3.5% invested with unit trust and investment funds.
This could mean that Singa is more of an active do it yourself investor rather than a passive investor who hands their investments over to someone to actively manage.
Also, only a small percentage (0.7%) of Singa’s portfolio is allocated towards pension funds.
Singapore Household Liabilities
In terms of liabilities, Singapore households have $322.4 billion in debt.
These liabilities are broken down into:
*Others – examples of other personal loans include:
- Education loans
- Renovation loans
- Pawnshop loans
- Hire purchase loans (excluding loans for motor vehicles)
- Overdrafts and loans extended to individuals for investment and business purposes.
Unsurprisingly, mortgage loans account for the lion’s share (75.6%) of Singapore households’ liabilities.
This is a pattern that has been observed in recent years.
But overall, Singapore households’ debt to asset ratio is still rather low at about 12.6 per cent.
Ideally, this should be kept as low as possible.
But as you can see from the household debt-to-assets ratio of select European countries, Singapore households can be considered to be quite prudent.
What Does It Mean for You?
In addition to providing insight into what Singaporean households’ wealth looks like, there are some key personal finance lessons you can take away from this.
Through this breakdown of Singapore households net worth and the trends we have identified, I hope you would have gained a clearer understanding of net worth — a vital component of your personal finance framework.
Another important lesson you can take away is to be more prudent with managing your liabilities.
Like Singapore households as a whole, you should aim to keep your liabilities down.
As Morgan Housel the author of the bestseller The Psychology of Money stated in his book:
Wealth is created by suppressing what you could buy today in order to have more stuff or more options in the future. No matter how much you earn, you will never build wealth unless you can put a lid on how much fun you can have with your money right now, today.
Also, from the breakdown of the assets, you can see the importance of a well-diversified portfolio that will minimise your risk of loss of capital.
Here is a step by step guide that will help!