Buying a Build-To-Order (BTO) flat is possibly the first major buying decision many Singaporeans make in our lives. With property prices rising in Singapore, paying for a home in the 3rd most expensive residential property in the world is a step that requires significant financial means. However, buying a home may not be as out of reach as it seems with the help of government grants and HDB subsidies.
While we have previously calculated how much salary you need to earn to afford the various property types in Singapore, the 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 is 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 calculations 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: 10% for HDB flats
- We are taking a 25-year home loan tenure
- Interest rates for our home loan is 2.6% for HDB flats
- 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 2021 and November 2020 launch prices. 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.
These are the salaries need 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 a 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.
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 $32,000, a price that a salary of $260 to $270 a month can afford.
Conversely, the most expensive BTO flat available – the 5-room in a mature estate – will require a salary of $5,250 to afford and at this income level, the household income will exceed the cap for EHG.
Be Realistic About Your Housing Purchase
While it is possible according to our calculations to only pay $32,000 for a BTO flat, it may not be realistic to expect this to be true in real life. Firstly, the BTO prices are an average of past launches, we do not know what the prices of future BTO launches will be, even if we expect them to be fairly reasonable. Additionally, 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.
More importantly, we assumed in the calculations that you will receive the maximum housing grant possible. This may not be true because of the eligibility criteria of the Enhanced CPF Housing Grant which requires at least one applicant to be in continuous employment for a minimum of 12 months at the point of application. This may be a difficult requirement to meet especially for the lower income.
Additionally, the calculations are based on the maximum leverage, after accounting for MSR and TDSR. However, it doesn’t mean that it is practical nor advisable to take on the maximum debt in order to fund the largest property we can afford. By locking our monies into our flat, we will have very little leeway to cushion any unexpected life emergencies (such as an unexpected retrenchment or pay cut), or even just enjoy life by splurging on indulgences (such as expensive meals or new gadgets).
Instead, take the above calculations as a rough reference and budget your housing purchase according to your lifestyle and finances. Don’t forget to count in the cost of buying a home including stamp duties, legal fees, renovations and furnishings.
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