Buying A Resale Flat: Here’s Much You Need To Earn (After Government Grants) To Afford The Different Resale Flat Sizes
As of the latest May 2021 sales launch, the estimated completion for BTO flats ranges from 4 to over 5 years. With BTO completion dates stretching longer with every COVID-19 induced delay, it’s little wonder that more couples and families are considering resale flats as their first home option.
Resale flat prices have also been on a rise (driven by the increased demand). Overall resale flat prices have increased by 3% in 1Q2021 from the 4Q2020. The Resale Price Index which monitors the price movement of HDB resale flats has risen from 131.5 to 142.2 from 1Q2020 to 1Q2021, about a 10% increase in a period of 1 year.
So how much do we really need to buy a resale flat in Singapore? We have previously found that it is possible to buy a BTO flat, even in a mature estate, with a household income of less than $1,000 after accounting for all the grants and subsidies. So let us crunch the numbers and find out how much salary we really need to earn to afford the various resale flat sizes in Singapore.
Assumptions For Our Calculations
The following calculations are only meant as a guide and would differ depending on our individual circumstances. Do speak to a trusted agent or home loan broker before committing to a home purchase and loan. Assumptions used in the calculations:
- We do not have any other loans (for the sake of Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) calculations
- We do not need to think about other financial commitments so that our full salary can be committed towards our housing purchase
- We have enough money for the downpayment: 10% for HDB flats
- We are taking a 25-year HDB home loan tenure
- Interest rates for our home loan are 2.6% for HDB flats
- We meet the eligibility criteria for the maximum government grants for our income and both spouses are Singapore Citizens.
- For the salary required, we assume that both husband and wife are working and earning the same salary
- We do not take any other costs into consideration, including Stamp Duty, lawyer fees, renovation or other expenses
- The resale flat prices used are based on 1Q2021 median resale prices for registered resale applications from HDB’s resale statistics. As there is insufficient data for 1 or 2-room resale flats, these flat types are not included in this article.
The Salary We Need To Afford Buying A Resale Flat (By Different Flat Sizes)
As the median HDB resale prices are organised by estates, we have taken the average (mean) price across all estates for the various flat types.
|Resale Flat||Average Housing Price ($)||Minimum Downpayment ($)||Outstanding Payment ($)||Monthly Repayment ($)||Household Income ($)||Salary Per Spouse ($)|
Without any grants, a Singaporean household would need to earn about $4,500 to afford a 3-room resale flat.
The Salary We Need To Afford Buying A Resale Flat (By Different Flat Sizes) With Enhanced CPF Housing Grant (EHG) And Family Grant
The Enhanced CPF Housing Grant (EHG) gives first-time homeowners additional subsidy based on their average household monthly income. This grant can be applied to offset the purchase price of the flat or to Reduce the mortgage loan for the flat purchase. However, it cannot be used for the minimum cash downpayment (if any) and monthly mortgage instalment payments.
Additionally, first-time homeowners buying a resale flat are also eligible for the Family Grant. This grant provides $30,000 to $50,000 grant for eligible first-time applicants buying a resale flat.
Note: Taking the HDB concessionary loan allows you to pay for your downpayment fully in CPF, meaning you can use the grants (EHG and Family Grant) for downpayment if you are taking an HDB loan. For the purposes of our calculations, we are applying the grants fully to offset the purchase price, instead of applying a portion of it to the downpayment.
|Resale Flat||Average Housing Price ($)||EHG ($)||Family Grant ($)||Price After Grants ($)||Minimum Down-payment ($)||Outstanding Payment ($)||Monthly Repayment ($)||Household Income ($)||Salary Per Spouse ($)|
With the EHG and Family Grant, resale flat prices become much more affordable, especially for 3-room buyers who are eligible to receive $100,000 in grants in total. With grants, a 3-room resale flat price will come down to about $228,000 which can be afforded by a household income of $3,100.
Buying A Resale Flat May Not Be The More Expensive Option
The common perception about buying a flat in Singapore is that BTO flats are cheaper than resale. While this holds true for BTO flats in non-mature estates, buying a resale flat may be cheaper than buying a BTO flat from a mature estate, once we account for all the grants.
Unlike BTO flats which have the full 99-year lease remaining, resale flats have shorter remaining leases. As the prices reflected in our computation is the average prices, it is likely that a resale flat near that price point is an older flat with a much shorter lease.
Resale flats, especially those that are not freshly out of their first Minimum Occupancy Period (MOP), are also less likely to enjoy significant price appreciation due to lease decay. Whereas BTO flats, especially those in mature estates, tend to command a price premium due to their relatively fresh leases. In fact, several of the $1 million HDB flats come from BTO flats, fresh out of MOP, in centrally located mature estates, such as Dawson and Tiong Bahru.
For families looking for a place to start their first home, resale flats are a good option, and one should not dismiss them due to their higher market price. The EHG and Family Grant do go a long way in making resale flats a viable option for a first home.
However, do crunch your own numbers to see if they work out in your favour or enlist the help of a trusted agent or home loan broker. These computations are based on the maximum housing grant possible and the maximum leverage, after accounting for TDSR and MSR, which may not be applicable to your individual circumstances.
Budget your housing purchase according to your own lifestyle and household finances. The cost of buying a house is often higher than the purchase price of the flat as you will also need to budget for additional costs such as stamp duties, legal fees, renovations and furnishings.