Unbelievable but yes, one can have the opportunity to own a home with an initial sum of $0. This is a shocker for most, especially since Singapore has a global reputation for being one of the world’s most expensive cities to live in. Sadly, you do not qualify for this opportunity if you are not a full-time student/NSF and are above 30 years old.
Under the Staggered Downpayment Scheme and Deferred Income Assessment Component recently introduced by the Housing Development Board (Board), full-time students and NSFs are able to apply for a flat without having to be employed or possess a steady stream of income. If you are a student/NSF interested in applying for a flat, check out our previous article!
For those who do not make the cut, fret not! In this article, we will be taking a look at how much you would need minimally to comfortably afford each tier of housing in Singapore, from a typical HDB flat to Good Class Bungalows. We will be assuming the case of a family of 4 to aid in calculations and estimations.
4 Room HDB
We will begin with the ones in non-Mature estates (e.g Sembawang, Woodlands). Some simple jargons we will be using, a non-mature estate is an estate that is younger than 20 years, with fewer amenities. The converse is true for the mature estates.
A 4-room HDB unit in a non-mature estate costs between $295-$300K. Let us take the upper limit of the range, $300K. First, we will evaluate the differences between the 2 available repayment modes, HDB Loan and Bank Loan:
| HDB Concessionary Loan | Bank Loan | |
| Down payment Sum (%)& Method of Payment | Minimum 10% of purchase/valuation price=
$30,000 (payable thru cash and/or CPF) |
Minimum 25% of Purchase/Valuation price=
$75,000 *minimum 5% must be paid in CASH
(remaining 20% payable thru cash and/or CPF) |
| Interest Rate | 2.6% | Average 1.6%-2.5%*lower interest rate, but floating interest that depends on market conditions |
| Loan Tenure | Max 25 years | Max 25 years |
| Monthly repayment of remaining sum | $1,225 | $932 |
This table is a rough estimation, not inclusive of other payables such as legal fees, renovation fees, property tax and conservancy fees. Assuming you are not cash-wealthy, likely you would opt for the HDB Concessionary Loan. Which means, your monthly loan is $1,225. In Singapore, Total Debt Servicing Ratio (TDSR) applies, which means that not more than 60% of one’s income should go to loan servicing. For HDB flats, you will also have to take into consideration the Mortgage Servicing Ratio (MSR) at 30% of your monthly recognised income. Assuming your max out the highest possible loan ratio of 30% MSR, the calculation follows:
$1,225 = 30%
100% = $4,083
This implies that the minimum income required to afford a 4-room HDB in a non-mature estate at $300K price point would be $4,083. Should the home be a shared asset with the mortgage cost borne equally by 2 individuals, each couple would be required to have a minimum income of $2,041 per month. While these numbers seem on the lower end, they do not include the actual cost of living, amongst other things, such as taxes. But take heart, the Singapore government aims to ensure that housing remains an affordable venture, hence the introduction of several grants based on the various income levels. This would relieve the pressure just a tad bit!
When purchasing an HDB flat, being too wealthy can also be a problem. With an income ceiling of $14,000 (combined) for a 4 room, those who are earning above the $7K threshold, unfortunately, this housing option is not viable for you! Read on to find out more on the next tier of housing.
3 Bedroom Condominium (Non-Prime Estates)
For a 3-bedroom condominium in non-prime areas such as Tampines, Clementi or Bukit Batok, condominium prices range between $1-1.5 Million. In prime districts, it is not uncommon for prices to hover around the $6 Million price tag. Condominiums are a tier above HDBs in terms of lifestyle options, with a majority of condominiums offering in-house amenities such as swimming pools, BBQ pits and gyms, hence the higher price point.
So, let us take a look a look at what you would need minimally to afford a condominium priced at a price of $1 Million. Given that Condominiums are private properties, buyers do not qualify for government loans and grants like HDBs flats do. The only repayment mode would then be via private bank loans.
| Bank Loan | Calculation |
| Down payment Sum (%) | 25% of $1 Million=
$250,000 *5% must be paid in cash minimally |
| Loan Tenure | 25 years |
| Interest Rate | 1.6%-2.5%*we assume an average of 2% |
| Monthly repayment Amount | $3,179 |
This table is again only a rough estimation, not inclusive of other payables such as stamp duties, legal fees, renovation fees, property tax and conservancy fees. Yet again, TDSR applies here and we assume that one maxes out the highest possible loan ratio of 59%, the calculation follows:
$3,179 = 59%
100% = $5,388
This implies that the minimum income required to afford a basic 3 Bedroom Condominium in a non-prime estate at $1 Million price point would be $5,388. Should the home be a shared asset with the mortgage cost borne equally by 2 individuals, each couple would be required to have a minimum income of $2,694 per month. Yet again, don’t get your hopes up. These numbers do not include everything else! For most condominiums, conservancy fees range between $300-$600 which could pile up the bills quite significantly!
A few words of caution for prospective private home buyers, taking a bank loan may initially seem like a financially viable route given the initial low-interest rates. But as we have mentioned, most bank rates are floating and tend to see increases over the tenure period. Do plan and ensure that you have an emergency fund to rely on in the case of any unforeseen circumstances (we suggest minimally 6 months).
Landed Property
Land properties are often regarded as the ultimate display of financial prowess. Split into 3 main types: Terrace, Semi-Detached, and Detached. A semi-detached option averages about $4.1 million; terraces go at an average of $2.8 Million; and detached properties fetch prices starting at $13.1 Million.
We will assume the lowest tier, terrace houses – cluster landed properties with both sides attached to a neighbour, with the exception for corner units. Take a look a look at what you would need minimally to afford a terrace house priced at $2.8 Million. Given that landed properties are considered private properties, buyers only have the option of repayment schemes via a bank loan. Here is the calculation:
| Bank Loan | Calculation |
| Down payment Sum (%) | 25% of $2.8 Million=
$700,000 *5% must be paid in cash minimally |
| Loan Tenure | 25 years |
| Interest Rate | 1.6%-2.5%*we assume an average of 2% |
| Monthly repayment Amount | $8,901 |
Yet again, TDSR applies here and we assume that one maxes out the highest possible loan ratio of 59%, the calculation follows:
$8,901 = 59%
100% = $15,086
The minimum income required to afford a Terraced House in a non-prime estate at $2.8 Million price point would be $15,086. Should the home be a shared asset with the mortgage cost borne equally by 2 individuals, each couple would be required to have a minimum income of $7,543 per month.
Choosing a home that fits your family’s lifestyle and needs is often an emotional affair. But remember, that it is of key importance that your financial health is not compromised as well. Choose something that is within your means; no one likes paying for a mountain of debts and loans every month!
Remember that it is not the house that makes it special, it is the relationships and bonds in it that makes it home.
