Monetizing Housing Equity to Generate Retirement Incomes
AbstractThe public housing program and the unique way of financing housing through the mandatory savings system in Singapore have created a class of homeowners. This paper compares the instruments available to different flat owners to monetize their assets, including the Lease Buyback Scheme (LBS), subletting, downsizing and reverse mortgage. We estimate the present value of retirement incomes derived from these options by incorporating the survival probability which is forecasted using the Lee-Carter demographic model. We compare the monthly payouts that can be unlocked and discuss the tradeoffs of adequate retirement with the elderly preference for leaving a bequest and ageing in place. Our results show that LBS is the most attractive option. It allows the elderly to age-inplace while generating a steady stream of monthly drawdown and possibility of leaving a bequest. Subletting releases housing equity while retaining the asset. This helps the elderly to fulfill their bequest motive. Reverse mortgage is the least attractive option, yielding the lowest retirement income due to high loading factors.
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Bibliographic InfoPaper provided by National University of Singapore, Department of Economics, SCAPE in its series SCAPE Policy Research Working Paper Series with number 0901.
Date of creation: Jul 2009
Date of revision:
Other versions of this item:
- Ngee-Choon Chia & Albert K C Tsui, 2009. "Monetizing Housing Equity to Generate Retirement Incomes," Microeconomics Working Papers 22759, East Asian Bureau of Economic Research.
- R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
- H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
- H82 - Public Economics - - Miscellaneous Issues - - - Governmental Property
This paper has been announced in the following NEP Reports:
- NEP-AGE-2009-08-22 (Economics of Ageing)
- NEP-ALL-2009-08-22 (All new papers)
- NEP-SEA-2009-08-22 (South East Asia)
- NEP-URE-2009-08-22 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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NBER Working Papers
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- Ngee-Choon Chia & Albert K C Tsui, 2005.
"Medical Savings Accounts in Singapore: How much is adequate?,"
SCAPE Policy Research Working Paper Series
0502, National University of Singapore, Department of Economics, SCAPE.
- Chia, Ngee-Choon & Tsui, Albert K.C., 2005. "Medical savings accounts in Singapore: how much is adequate?," Journal of Health Economics, Elsevier, vol. 24(5), pages 855-875, September.
- Ngee-Choon Chia & Albert K C Tsui, 2005. "Medical Savings Accounts in Singapore : How much is adequate?," Finance Working Papers 22567, East Asian Bureau of Economic Research.
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