By MAK KUM SHI
Ageing demographics, financing for senior citizens and retirement homes are expected to make an impact in the future for the property market.
IN years to come, senior citizens will make up a bigger segment of the Malaysian population. In view of this development, retirement homes and innovative financing schemes for senior citizens are expected to emerge in the future.
Many married couples in Asia, including in Malaysia, are significantly underestimating the length of time they will spend in retirement, and as a result, are likely not accumulating sufficient retirement savings.
Manulife Asset Management Services Bhd chief investment officer Jason Chong said, “Married couples in Malaysia face average joint retirement of 27.4 years, which represent a generally ‘higher’ degree of longevity risk relative to their peers across Asia. This is partly because Malaysians retire from the workforce relatively early.”
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Manulife Asset Management president for international asset management Michael Dommermuth said, “We feel that marital status in particular is too often ignored in retirement planning. The vast majority of Malaysians continue to enter retirement as part of a married couple and thus should factor in the likelihood of one partner, usually the wife due to longer life expectancy for women, outliving the other.”
The potential that couples will outlive their retirement savings would increase if they do not factor in the potentially significantly longer life expectancy of their partners. This situation is made worse by the fact that expenses are not cut in half by the death of a spouse as cohabitation delivers economies of scale for living costs.
Than Hsiang Retirement Home is surrounded by scenic beauty.
According to Manulife Asset Management’s “Live long and prosper?” report, Malaysians attach far less importance to retirement as a financial objective. This attitude is influenced by the fact that a high proportion of Malaysians expect to receive financial support from their adult children during their retirement years.
To address these challenges, policymakers are already taking steps to reduce longevity risk for their citizens. While Malaysia’s official retirement age was raised to 60 from 55 in 2013, responsibility for retirement income security is increasingly shifting to individuals.
Effective deployment wealth would reduce the chances of outliving retirement savings by delivering the potential for returns in excess of bank deposit rates.
Addressing demographic challenges
Paramount Corp Bhd group chief executive officer Jeffrey Chew said, “One of the things we are looking in the next five to 10 years is the demographic shift in terms of the birth rate and population growth that is actually slowing down as a country. However, the growth rate in terms of the more aged population in terms of over- 65 age group is growing very fast at 5% per annum in Malaysia.
“This group is growing bigger every year. Retirement homes are something we are exploring, and we are among the pioneers that are going in a very big way. This is something we are targeting in terms of innovation.”
Chew added that it is crucial to provide innovative financial packages to enable more people to afford and live in retirement homes. This is due to the challenge of people aged 60 onwards without an income being able to obtain financing to buy a retirement home.
Innovative financing for senior citizens
However, there are developments that are addressing these financing challenges for senior citizens in the region.
According to Manulife Asset Management’s “Asset rich, income poor?” report, about 60% of Singapore’s total household wealth is tied up in property-related investments.
Foreign works residing in Singapore have, to some extent, propped up the value of real estate and the nation’s highly constrained developable land area adds a speculative element to housing, rendering real estate relatively expensive.
Singapore’s government recognises that much of the population’s wealth is illiquid and has been attempting to help citizens monetise their real estate holdings by encouraging the development of a reverse mortgage market. However, it remains to be seen whether Singaporeans have embraced this new retirement funding technique.
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