After 2 years of quarterly HDB resale price increases, first-time homebuyers may be disheartened by the prospect of expensive home price. Thankfully, there is the option of buying a Build-To-Order (BTO) flat directly from HDB which is highly subsidised for first-timers. With the help of HDB subsidies and government grants, the buying a home in Singapore isn’t as far beyond our means as first-time homebuyers may think.
According to our calculations of how much salary you need to earn to afford the various property types in Singapore, a couple would need to earn about $2,615 per spouse to afford a 3-room resale HDB flat. However, these calculations did not include government subsidies which may bring down the cost of buying your first home significantly. These government subsidies include the CPF housing grants and the HDB subsidies that are built into the subsidised prices of BTO flats.
Here’s how much salary you need to earn (after government subsidies) to afford the different BTO flat sizes in Singapore.
Assumptions For Our Calculations
The following calculation is only meant as a guide and would differ depending on our individual circumstances. Do speak to a trusted agent or home loan broker before committing to a home purchase and loan. Assumptions used in the calculations:
- We do not have any other loans (for the sake of Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio calculations (MSR))
- We do not need to think about other financial commitments, so that our full salary can be committed towards our housing purchase
- We have enough money for the downpayment: 15% for HDB flats
- We are taking a 25-year home loan tenure.
- Interest rate for our home loan is 2.6% for HDB flats. Mortgage payments are calculated using HDB’s calculator
- We meet the eligibility criteria for the maximum government grants for our income
- For the salary required, we assume that both husband and wife are working and earning the same salary
- We do not take any other costs into consideration, including Stamp Duty, lawyer fees, renovation or other expenses
- The BTO flat prices used are an average of the February 2022 and November 2021 launch prices (excluding PLH and short-lease launches). These prices may differ from the prices on the HDB Flat Portal as well as future BTO launch prices.
The Salary We Need To Afford Buying A BTO Flat (By Different Flat Size)
As the BTO flat prices are differentiated by whether they are located in mature or non-mature estates, we have also separated the types accordingly.
|Average Housing Price ($)||Minimum Downpayment ($)||Outstanding Payment ($)||Monthly Repayment ($)||Household Income ($)||Salary Per Spouse ($)|
|2-Room Flexi (Type 1)||126,000||18,900||107,100||486||1,620||810|
|2-Room Flexi (Type 2)||152,000||22,800||129,200||587||1,957||978|
|2-Room Flexi (Type 1)||219,000||32,850||186,150||845||2,817||1,408|
|2-Room Flexi (Type 2)||277,000||41,550||235,450||1,069||3,563||1,782|
These are the salaries needed to purchase a subsidised BTO flat directly from HDB, without accounting for the additional housing grants.
The Salary We Need To Afford Buying A BTO Flat (By Different Flat Size) With Enhanced CPF Housing Grant (EHG)
The Enhanced CPF Housing Grant (EHG) gives first-time homeowners additional subsidy based on their average household monthly income. This grant can be applied to offset the purchase price of the flat or to Reduce the mortgage loan for the flat purchase. However, it cannot be used for the minimum cash downpayment (if any) and monthly mortgage instalment payments.
Note: taking the HDB concessionary loan allows you to pay for your downpayment fully in CPF, meaning you can use the EHG for downpayment if you are taking an HDB loan. For the purposes of our calculations, we are applying the EHG fully to offset the purchase price, instead of applying a portion of it to the downpayment.
|Average Housing Price ($)||EHG ($)||Price After EHG ($)||Minimum Downpayment ($)||Outstanding Payment ($)||Monthly Repayment ($)||Household Income ($)||Salary Per Spouse ($)|
|2-Room Flexi (Type 1)||126,000||80,000||46,000||6,900||39,100||178||593||297|
|2-Room Flexi (Type 2)||152,000||80,000||72,000||10,800||61,200||278||927||463|
|2-Room Flexi (Type 1)||219,000||75,000||144,000||21,600||122,400||556||1,853||927|
|2-Room Flexi (Type 2)||277,000||65,000||212,000||31,800||180,200||818||2,727||1,363|
As seen from the tables above, the Enhanced CPF Housing Grant (EHG) can make a significant difference in the prices of BTO flats, especially for the smaller flat sizes and the salaries needed to purchase them.
With the maximum EHG of $80,000, it would bring down the price of the cheapest BTO flat available – the 2-room Flexi (Type 1) in a non-mature estate – to $46,000, a price that a salary of close to $300 a month can afford or a $600 household income.
Conversely, the most expensive BTO flat available – the 5-room in a mature estate – will require a salary of $3,700 to afford, and at this income level, the household would only qualify for only $20,000 EHG, much lesser than the $80,000 maximum available.
Be Realistic About Your Housing Purchase
However, it may not be realistic to expect only to pay $46,000 for a BTO flat in real life. Firstly, the price is for a 2-room Flexi (Type 1) which is about 36 sqm or 387 sqft which is not the typical choice for couples intending to start a new family.
Secondly, the BTO prices are an average of past launches. Even if we expect them to be fairly reasonable, we do not know what the prices of future BTO launches will be. In fact, just by comparing last year’s edition and this year’s calculation, the average price of 2-room Flexi (Type 1) has increased from $112,000 to $126,000, a 12.5% increase. Additionally, changes to property measures such as the Loan-to-Value (LTV) limit can also affect our borrowing capability.
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