Reality 1: Cooling Measures Benefit Singaporean First Timer

Cooling measure primarily target multiple home-buyers and foreigners. Singapore citizens do not need to pay Additional Buyer’s Stamp Duty (ABSD) on their first home.

Singapore Citizens ABSD Payable:

  • 1st Home – 0%
  • 2nd Home – 17%
  • 3rd Home onwards – 20%

Singapore Permanent Residents

  • 1st Home – 5%
  • 2nd Home – 20%
  • 3rd Home onwards – 25%

Foreigners

  • 1st Home onwards – 30%

Singaporean first timers can enjoy maximum LTV limits at 75% due to high leveraging and use of the CPF, the minimum cash downpayment is low. How low is the minimum cash downpayment for a S$1,000,000 (1 million) property? Assuming an average 30 years old couple:

  • Individual Income (monthly) – $6,130
  • 75% Loan – $750,000
  • 25% Downpayment – $250,000
  • Mortgage Interest – 2% p.a.
  • Loan Tenure – 30 years

This couple only need to fork out the first 5% ($50,000) in cash, which is equivalent to saving an extra S$695 each per month for 3 years. Next 20% ($200,000) from CPF Ordinary Account (OA), How long will it take for the couple to accumulate to $200,000? 6 years! assuming 2.5% interest earned in CPF OA with a combined income of $12,000/mth.

All you have to do is to put aside some money for a few years! If you can plan your finances well, buying a S$1,000,000 condo is actually manageable!

 

 

Reality 2: Monthly Repayments Are Affordable To Most Singaporean Co-Borrowing

Monthly repayments are NOT a significant burden if you and your spouse are co-borrowers. Monthly repayments work out to be $2,772 for the couple’s $1,000,000 home. That is only 23.1% of their combined income.

 

 

Reality 3: With The Same Income, You Can Purchase A Higher Valued Private Property Compared To An HDB Flat.

You may think an HDB loan is easier to get, but did you know?

You can borrow 2x as much with a bank loan to purchase private property compared to an HDB loan? For HDB Loans, you are bounded by the Mortgage Servicing Ration (MSR) and it caps your property loan repayment to a maximum of 30% of your monthly income.

For bank loans used to purchase private property, you are bounded by Total Debt Servicing Ratio (TSDR), which caps your total loan repayments to a maximum of 60% of your monthly income!

This means that with the same income, you can buy a higher valued private property compared to an HDB flat

Couple B Buying Private Property

Couple C Buying Private Property
Combined Income

S$12,000/mth

 Combined Income

S$12,000/mth
60% TDSR Limit

S$7,200/mth

 30% MSR Limit

$3,600/mth
Medium Term Interest

3.5% p.a

 Medium Term Interest

3.5% p.a
Max Mortgage Tenure

30 years

 Max Mortgage Tenure

25 years
75% Loan

$1,603,404

 90% Loan

$719,103
Max Affordability

$2,137,872

 Max Affordability

$799,003

Note: The assumptions are based on the maximum allowable tenure and the Loan-to-value ratios, with no outstanding debt

$2,100,00 vs $800,000

Why not enjoy a higher valued private property, especially when it has a better upside potential?

 

 

Conclusion

with a bit of proper planning, don’t you think a private home can actually be affordable?

Do you believe that cooling measures actually benefit Singaporean first timers?

Why not buy and enjoy a higher valued private property, especially when it has better upside potential?

Would it be better to plan by yourself or leverage on ERA’s wealth of expertise?

 

We will help you plan and find a property with financial prudency