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Even though a vast majority of Singaporeans live in HDB flats, there can be some misconceptions about them floating around.
We sometimes hear people lamenting about how “broke” they are after spending their life savings on an HDB flat, that non-mature estates are typically in inaccessible locations with little to no amenities or that resale flats are expensive, with some flats priced beyond the million-dollar mark. And so, how much truth is there to these?
Watch: How to Save on Your First Home in Singapore
The truth is, while buying a home in Singapore may not be very cheap, a HDB flat might be more affordable and accessible than you think.
In order to better plan for the purchase of your first home, it’s important to stay informed, research and plan ahead, and not to take everything you hear at face value.
So, to put you on the right track, let us debunk some of the common misconceptions first time homebuyers have about buying an HDB flat.
1) Is public housing really unaffordable?
While buying a house is certainly a big-ticket purchase, if planned properly, it is very possible to pay your housing loan instalments using just your CPF savings, without any additional out-of-pocket cash! In fact, about 80% of first-time homebuyers pay no cash for their HDB flat.
To better help you plan your budget, a general guide is that your monthly loan repayment should not exceed one quarter of your combined gross monthly income. For example, if you and your spouse are earning a combined income of $4,000 each month, you should ensure that your monthly loan repayment is below $1,000.
Better yet, there are grants available to help you defray the cost of your flat, regardless of whether you are buying a Build-To-Order (BTO) flat or resale flat (see next point!).
2) Are resale flats always much more expensive as compared to BTO flats?
The selling prices of BTO flats are usually lower than their resale counterparts because of the significant subsidies provided on new BTO flats. But that does not mean that resale flats are necessarily that much more expensive in comparison.
Just as BTO flat buyers get to enjoy housing grants to make their home purchase more affordable, so do buyers of resale flats. In fact, HDB resale flat buyers may be eligible for higher grants.
First-time homebuyers buying a resale flat can receive up to $160,000 (up from $120,000) in housing grants when buying a resale flat from 11 Sep 2019.
This is because they can enjoy up to $50,000 in CPF Housing Grant, up to $80,000 in Enhanced CPF Housing Grant (EHG) and up to $30,000 in Proximity Housing Grant.
In comparison, first-time homebuyers purchasing a new flat from HDB may enjoy up to $80,000 in EHG.
Previously, the grant structure favours new flat buyers as the Special Housing Grant (SHG) was applicable only for purchase of a 4-room or smaller flat in non-mature estates and had an income ceiling of $5,000. With the new EHG, up to $80,000 is extended to both new and resale flat buyers, regardless of flat type and estate.
The EHG is also pegged to a higher income ceiling of $9,000, which means that even more people can benefit.
While the EHG replaces the Additional Housing Grant (AHG) and SHG, the grant structure will continue to be tiered, to provide lower income households more assistance.
Not sure if you should buy a BTO or resale flat? The important thing is to weigh the pros and the cons and decide for yourself which option best meets your budget and needs. Specifically for those who are in need of a flat urgently or are looking to buy a flat in a particular location, a resale flat may be a better option.
Use these calculators to find out how much loan amount and grants you are eligible for.
3) Is public housing in Singapore really more expensive than in other cities?
Well, of course it depends on which city you are comparing to.
According to the latest International Housing Affordability survey by Demographia, an urban planning policy consultancy, the most affordable major housing markets were in the United States, with housing prices 3.9 times household income, followed by Canada (4.3) and Singapore (4.6). The survey showed that the most “severely unaffordable major housing markets” as of Q3 2018 are Australia, New Zealand, and Hong Kong.
The study had looked at 309 metropolitan markets across eight countries and used the “mean multiple” approach – the median house price divided by the median household income.
Furthermore, today, the typical mortgage servicing ratio in Singapore is less than 25%, well within international benchmarks of affordability of around 30-35%. This means that less 25% of one’s gross monthly income is used to service a home loan.
As you can see, there are quite a few factors that make HDB flats more affordable and accessible than they might seem.
Our advice? Do your research, and find a place that you can comfortably afford, and actually feel comfortable in as well! It is after all a place that you are going to call home for a while.