10 years ago in 2014, I wrote about how much does a couple need to earn in order to afford a $300,000 HDB flat. The post went viral at that time because HDB prices were rising very quickly which made many young people worried about the affordability of owning their own home.
Fast forward to 10 years later today, I did a quick check and realised that HDB BTO prices are still kept quite affordable at an average price of $300K to $400K for 4 room flats unless you're getting a flat in the central region of Singapore which will be priced higher at close to $600K.
However, not everyone will get a chance to get BTO flats. I have friends who have tried many times year after year and still couldn't get their BTO flat. In the end, they had to turn to the resale market to buy their flat which cost much higher.
When we see headlines such as "Number of million-dollar HDB flats resold hit all-time high in June" & "Five-room resale flat in Bukit Merah goes for record S$1.59 million", it makes us more anxious to know whether we really can afford to buy a flat of our own now?
How much do resale HDB cost now?
HDB has a website to show all the transacted resale prices of all areas in Singapore. You can access the website here.
If you're looking at flats in the central area, the prices are all above $1.2M for a 4 room HDB flat with about 85 years remaining lease as shown below:
If you look at less central areas such as woodlands, the resale price of a 4 room HDB flat are in the range of about $660,000 with about 94 years remaining lease as shown below:
Even for areas in the west such as Jurong West, it is selling at about $700,00 for a 4 room resale HDB flat with about 90 years remaining lease.
Let's say a typical scenario will be a couple will buy a $600,000 4 room HDB flat in a not so central part of Singapore.
HDB flat price: $600,000 (4 room flat)
Down payment: $60,000 (10%)
Number of years of loan: 25 years
Loan amount: $540,000
HDB loan interest rate: 2.6%
Monthly housing loan instalment payable: Estimated $2450
Here are a few things a couple should note when buying a house:
1) Downpayment of 10%.
This means if you don't have $60,000 in your
CPF account, prepare to pay some in cash. You need this amount to settle the first part of your house.
2) Number of years of loan from HDB is limited to 25 years currently. You can't get more than that. It was 30 years many years back but it was brought down during the cooling measures 10 years ago.
3) HDB loan interest rate is fixed at 2.6% currently. Currently HDB loan interest rates are lower than most banks which are in the range of about 4%. With HDB loan, you don't have to worry about interest rates rising
4) A maximum of 30% of your gross monthly income can go into home loan repayments currently. If you earn $3000, only $900 can be used to pay for your housing loan. This is known as the Mortgage Servicing Ratio(MSR) Also take note that housing loan repayments, after adding all your repayment obligations (student loans, credit card debts, car loans, personal loans, etc.), cannot exceed 60% of your income. This is the Total Debt Servicing Ratio(TDSR).
How much does a couple need to earn in order to afford a $600,000 resale HDB flat?
If monthly instalment is $2450 for a $600,000 HDB flat with 25 years loan repayment period, you and your spouse's combined gross income must be at least approximately $8166. The magic number is $8166 which means each of you must earn approximately $4100. This is to meet the 30% criteria of the maximum gross monthly income that can go into home loan repayment. Any income below that level and HDB may not grant you the loan you need.
Even before that, you need to come up with the $60,000 for the down payment. With a combined income of $8166, you and your spouse need to work for 32 months(~2.8 years) before your CPF savings have the $60,000. (calculated based on monthly CPF contributions to ordinary account only. Approximately 23% of gross monthly income goes to ordinary account which includes employee and employer contributions. The rest goes to special and medisave account respectively)
Let's summarise it. To afford a $600,000 HDB flat, you and your spouse should have a combined gross monthly income of at least $8166, work at least for 32 months to save up for the down payment ($60k) and pay $2450 monthly for the next 25 years.
How much money does a couple need to earn in order to afford a Million dollar HDB flat?
What if you really want the convenience of staying in a relatively central area such as Toa Payoh, Boon Keng, Kallang etc which have resale flats mostly selling at about $1 Million dollars?
HDB flat price: $1,000,000 (4 room flat)
Down payment: $100,000 (10%)
Number of years of loan: 25 years
Loan amount: $900,000
HDB loan interest rate: 2.6%
Monthly housing loan instalment payable: Estimated $4084
If monthly instalment is $4084 for a $1,000,000 HDB flat with 25 years loan repayment period, you and your spouse's combined gross income must be at least approximately $13,613. The magic number is $13,613 which means each of you must earn approximately $6800. This is to meet the 30% criteria of the maximum gross monthly income that can go into home loan repayment. Any income below that level and HDB may not grant you the loan you need.
Not forgetting you'll still need to have the $100,000 down payment to be paid upfront.
With median income of Full-Time Employed Residents hitting above $5000 in 2023 according to
MOM statistics, it is no wonder we are seeing more million dollars HDB flats as many are able to afford it now.
For private property, the loan quantum is even higher at 60% of your gross monthly income which is the total debt servicing ratio (TDSR). Maxing out your loan to 60% of your gross monthly income can be stressful especially if you lose your job. You will also not be able to take further loans such as car loans in the event you really need to buy a car for family needs as the TDSR is the limit set for all loans and not just housing loans.
I hope the above information helps you in planning to buy your first home.
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