This article was written in collaboration with HDB. All views expressed in this article are the independent opinion of DollarsAndSense.sg based on our research. DollarsAndSense.sg is not liable for any financial losses that may arise from any transactions and readers are encouraged to do their own due diligence. You can view our full editorial policy here.
As of 2021, the homeownership rate in Singapore is about 89%. Among resident households, about 8 in 10 live in HDB flats.
You can purchase an HDB flat via Build-To-Order (BTO) sales launches directly from HDB, or from the HDB resale market. For BTO launches, flats will typically take a few years to complete construction.
If you do not want to wait, the HDB resale market is an option you can consider. However, in recent years, HDB resale flats have seen an increase in price, with prices returning to 2012 levels.
With headlines about record-setting resale prices, some might be concerned that HDB resale flats are beyond reach. But as a savvy home buyer who knows what to look out for, you will still be able to find flats that are comfortably within your budget.
First, Determine Your Budget
The first (and most important) thing to do is to determine your budget. This isn’t just a matter of calculating how much you can afford based on your income today, but also what you are comfortable with paying over the long term. Buying a flat is, after all, a major long-term financial commitment.
The simplest way to calculate your budget is to use a financial calculator, like the one on the HDB Flat Portal. First, key in your CPF and cash savings, estimated grant amounts and income. The calculator will then generate a budget for you, based on the maximum amount you can borrow from HDB or participating financial institutions. You can then play around with the sliders for the loan amount and period, and see how this would impact your overall budget and monthly mortgage instalments.
Beyond relying on the calculator, you may also have heard about other ways of determining your housing budget. In a previous article, my colleague, Shashi, wrote about the 3-3-5 rule of buying an HDB flat. The 3-3-5 rule has three conditions that you, as a flat buyer, must fulfill to determine the affordability of the house you intend to buy.
– 30% of the property price
You need to have sufficient cash or CPF balance to pay at least 30% of the purchase price of the HDB flat to cover the initial payment, legal fees, and other related miscellaneous expenses.
Do note that this 30% requirement under the 3-3-5 rule is significantly more than the minimum initial payment of *15% required if you were to take a housing loan from HDB.
*For resale applications received by HDB on or after 30 September 2022, the initial payment will be revised to 20%, in line with the lowering of the Loan-to-Value limit for HDB housing loans to 80%.
– 1/3 of your monthly salary
Your monthly mortgage payment should not exceed one-third of your gross monthly salary.
– 5x your annual income
The total purchase price of the property should not exceed 5 times your annual income.
For example, a couple with a gross combined household income of $6,000 a month can 1) purchase a property of up to $360,000, 2) use up to $2,000 a month to service their monthly mortgage and should have 3) at least $108,000 in cash and CPF savings for their property.
The 3-3-5 rule is just one (stringent) way of calculating what you can afford. Depending on your circumstances, you may decide to increase or decrease your budget. The key here is to determine your ideal budget before you start looking for homes. This way, you avoid overstretching your finances when buying a flat.
Be Strategic About Flat Types and Neighbourhoods
Generally, housing estates in Singapore are well-served by a host of comprehensive amenities, such as shopping malls, parks, schools, sports facilities, bus interchanges and of course, MRT stations.
Nonetheless, there are towns that are perceived to be more convenient, because of their proximity to the city centre or certain other attributes. People may then naturally assume that all types of flats in the ‘better’ neighbourhood will be more expensive. However, this may not be the case.
Take for example, two popular adjacent housing estates – Toa Payoh and Ang Mo Kio. Based on 2Q2022 price statistics, the median price for 4-room HDB resale flats at Ang Mo Kio is $515,000. If we were to choose a 4-room flat at Toa Payoh, the median price is $700,900.
However, if we were to look at 3-room flats, the median price for a 3-room resale flat at Ang Mo Kio is $365,000, which is higher than the median price of a 3-room resale flat at Toa Payoh at $320,000.
|Ang Mo Kio||$365,000||$515,000|
Prices are based on median HDB resale price as of 2Q2022. Resale prices shown is excluding of housing grants that can be up to $160,000.
In both cases, the median resale price shown is before any housing grants such as the CPF Housing Grants for Resale Flats (Families) (up to $50,000), the Enhanced CPF Housing Grant (EHG) (up to $80,000) and the Proximity Housing Grant (PHG) (up to $30,000). In total, first-time buyers of HDB resale flats can enjoy housing grants of up to $160,000.
As a caveat, we want to stress that comparing prices between flat types across different neighborhoods omit other factors such as the flat’s access to amenities and storey height. Our main point here is that it is not always the case that one town would be more expensive than the other.
So, before you fix your mind on a specific town, be sure to consider others that might have more affordable options for the flat type you want.
Choose Lower Floors, Non-Corner Units
But even within an HDB block, not all flats are going to cost the same.
With all things being equal, units on lower floors and which are non-corner units will likely cost less. And the difference can be a lot more than what we expect.
Here’s an example in Jurong West. The project we are referring to is Spring Haven, a Build-To-Order project completed in 2017. Below is a screenshot of 4-room units sold in Aug 2022.
From the table above, we can see that two units in the same block (561A) sold with a price difference of $35,000. Note that the amount here is before the consideration of any housing grants, which can be up to $160,000.
This isn’t to say that the lower-floor units are always more value-for-money, or that buyers for higher-floor units are overpaying. Obviously, there are different value propositions between a high floor unit and a low floor unit. There may also be other differences that explain the difference in price between units, such as orientation, renovation, and condition of the flats. Rather, the point is that if you want to find a flat that fits within your budget, it is possible to find an affordable flat without having to compromise on location, flat size or the remaining lease, by opting for one on a lower storey.
For buyers, if you want all the boxes on your checklist to be ticked off, you may find that it will be hard to find your ideal flat without overstretching ourselves. Instead, think of your criteria as priorities, and rank them in order of importance to you. For example, your criteria could look like this.
|Criteria (Ranked In Order Of Importance)||Description|
|1||Flat Size||At least 4-room or above|
|2||Accessibility||Walking distance to MRT|
|3||Location||Within 4 km of where parents are living|
|4||Amenities||Walking distance to F&B and/or schools|
|5||Level||Preferably higher floor|
When your criteria are ranked according to your priorities rather than a checklist, it makes it easier for you to focus on what’s important, and what you are willing to compromise on. You can then give higher weightage to what’s important to you (e.g. having a larger flat and being near to an MRT) as opposed to what’s ideal but not absolutely necessary (e.g. higher floor, walking distance to F&B outlets).
Maximise The Use of Grants
For those who are eligible, maximising the use of housing grants that you qualify for is one simple way of reducing the purchase price of your flat.
For those looking to purchase HDB resale flats, here are three possible grants that you may qualify for.
Family Grant: The Family Grant offers first-time applicants a subsidy of up to $50,000. There is an income ceiling of $14,000 per month.
|Household type||2-room to 4-room resale flat||5-room or bigger resale flat|
|Singapore Citizen/ Singapore Citizen||$50,000||$40,000|
|Singapore Citizen /Singapore Permanent Resident||$40,000||$30,000|
Enhanced CPF Housing Grant (EHG): First-time applicants, regardless of whether they are buying an BTO or resale flat, may be eligible for the EHG. The grant amount is up to $80,000, depending on the combined average monthly income of the household, which must not exceed $9,000.
Proximity Housing Grant (PHG): If you are buying a resale flat within 4 km of where your parents/child are staying, or are intending for them to stay with you in the same flat, you will be eligible for the Proximity Housing Grant (PHG) of up to $30,000. The PHG does not have an income ceiling and you may qualify as long as you have not received the PHG before.
Living within 4 km of parents’/child’s place: $20,000
Living with parents/child: $30,000
Let’s return to the young, married couple (both Singaporeans and first-time applicant) with a gross combined household income of $6,000 a month. The couple is looking to purchase a 3-room resale flat in Toa Payoh so that they can live within 4 km of their parents in the same neighbourhood.
Here’s the amount of grants that they will qualify for.
|Family Housing Grant||$50,000|
|Enhanced Housing Grant||$35,000|
|Proximity Housing Grant||$20,000|
Assuming they purchase their 3-room HDB resale flat at Toa Payoh at the current median price ($320,000) as of Q2 2022, the price after the government grant will be $215,000.
Using the earlier example, a couple who earns a combined income of $6,000 a month would be able to afford their HDB resale flat based on the stringent 3-3-5 rule.
For example, the grants received ($105,000) would be more than enough to cover 30% of the flat’s price (or $96,000), in line with the 3-3-5 rule. Assuming they take up a loan for the remaining $215,000, at an interest rate of 2.6% p.a. over 20 years, the monthly repayment is $1,150 a month, comfortably below the 1/3 rule of their combined monthly salary. Lastly, the purchase price of the flat is also less than 5 times their gross annual salary ($360,000).
Buying an HDB resale flat shouldn’t involve breaking the bank. First, work out your budget. Then, set out in search for flats that can fit your budget, guided by a ranked list of priorities. With the help of housing grants, your HDB resale flat could be more within reach than you think.
Read Also: Understanding The 3-3-5 Rule Of Buying An HDB Flat