Many of our articles start by pointing out Singaporeans’ love for property investments. While we haven’t done any formal surveys, we think it’s a fact – given a choice – we would all rather own a property than its equivalent value in stocks, bonds, gold or bitcoins.
The 3 Main Stages Of Our Lives When We Buy Properties
When it comes to purchasing properties in Singapore, most of us tend to do it at three main stages in our lives – when we’re getting married, when we’re planning to expand our family and when we’re planning our retirement.
During these three main life stages, we have a different need, are in a different financial position and have different outlooks in our lives.
While majority of us buy properties for our own stay, there are also pockets of the Singapore population who purchase properties for other purposes, such as for investment or even for their parents to stay in. In this article, we’ll focus on the three main life stages that Singaporeans buy properties and their consideration.
Life Stage 1: Getting Married
We tend to be younger at this stage of our lives – according to the Singapore Department of Statistics, anywhere between 25 and 34 for females and 25 to 39 for males. And, as we’re likely just beginning to craft our careers, we also tend to be less affluent, earning less and having less in savings.
For a large majority of us, this means applying for a Housing Development Board (HDB) Build-To-Order (BTO) flat or buying an HDB on the resale market for the purpose of having a shelter over our heads. In the process of buying our first homes, we will also apply for grants that will lower the cost of our flats. Here’s a comprehensive view of the grants available to us.
In addition to the grants available to us, we have to consider the size of home we want to buy. The bigger the home we opt for, the more expensive it’s going to be. Since there’s likely going to be just you and your wife/husband, and approximately 1.20 children in the coming future (based on government statistics), you can comfortably start off with a 3-room flat, or even 4-room if you prefer.
During the last two BTO launches, the prices of 3-room flats sold at between $70,000 to $329,000 and 4-room flats sold at between $176,000 to $484,000, depending on the location of the unit.
For a couple both earning in the bottom 20th percentile, their combined pay would be $3,600, and according to the DBS Mortgage Affordability Calculator, their combined maximum loan amount on a 25-year loan is $215,700, well in advance of the lowest range for both 3-room and 4-room flats in Singapore.
Life Stage 2: Lifestyle Upgrade
At this stage of your life, you’re likely more established in your careers drawing a higher salary and have more in savings. One important consideration at this age is whether you want to upgrade to a larger home or upgrade to a more luxurious home – either a bigger HDB flat or a condominium.
One key factors for deciding this is of course, your household income. At the current median income, of $3,466, the DBS Mortgage Affordability Calculator indicates that their maximum loan amount is up to $415,000.
Another very important thing you need to think about is whether you expect to welcome new family members! Having one or two children will mean you need more space for them in the future, and also means you have to spend more bringing them up. If you don’t plan to have a child, or perhaps to stop at one, upgrading to a luxurious home, in the form of a condominium, could be your next move.
For a condominium, we last wrote an article on 23 June 2017, and based on prices at that time (before en-bloc wave hit), each couple needs to earn at least $3,667 to be able to afford a mortgage on a condominium outside core region (OCR) of Singapore. The same article also stated that prices were at an average of $1,200,000 – meaning you need to pay down at least $785,000 (which isn’t really feasible).
This means that in order to be able to move into a luxurious condominium home at this stage, you would need to earn in excess of the median salary in Singapore.
For a 5-room resale HDB flat, that costs $550,000 on average, the same article stated that each couple needs to earn at least $4,538. This is somewhat feasible as you’re able to get a large enough loan earning the median salaries.
Alternatively, couples can choose to apply for their second HDB BTO. Note that you have to pay a resale levy to be able to buy your second BTO. If you’ve chosen to do so, you can again refer to the past two BTO launches as a guide to how much your 5-room home will cost – between $312,000 to $579,000.
Life Stage 3: Retirement Planning
Most Singaporeans retire close to age 65 – the official retirement age is 62 actually, and we also have a “re-employment” age of 67.
Of course, long before hitting this milestone, we have to plan for the lifestyle we want to lead in retirement. There are likely two scenarios we face – the more likely one that we (or our parents) should consider downsizing to a smaller home and the less likely scenario that we seek to live with our children in a multi-generational home.
Regardless of how long we’ve lived in a home, it makes sense to downsize as our children leave and start living their own lives. We can realise a cash value on our homes, to utilise in retirement, as well as own a smaller place to maintain.
If we’ve done well and managed to save up a substantial amount or live in a larger condominium or landed property, we can consider selling it to purchase two properties – one to live in and another as investment for our retirement income. This may not be uncommon as many elderly folks may have bought large landed properties or condominiums when prices were lower and can afford to make this move.
On the other hand, if we think it’s feasible to live together with our children, we can consider purchasing a 3Gen home from the HDB – these don’t come often or cheap as the last two sales launches only had such units in one estate and it was selling for $622,000.
The advantage is that we may be able to save on shared household costs with our children’s family, and also spend more time with them and any grandchildren.
If your family has sufficient resources, you could even pool multiple names and share a downpayment to pay for a landed home with enough space for a multi-generational family. If you’re considering doing living together with your children, you have to ensure that you’re left with enough financial resources to afford your own daily lives. This is because if you need to sell the property, it won’t be just you that’s affected, your spouse, children and even grandchildren may be affected.
Carefully Consider Your Options At Each Stage Of Your Life
There are always pros and cons to buying and selling any properties. Given its pricelist and cost of purchasing and selling, the most important thing to consider is the affordability of a property. The last thing you want to do is overleverage yourself and have to be forced to sell a property.
Other than likely getting a lousy deal on your property, you will also adversely impact the lives of your family member.