Chances are, you’re a Singaporean just like me. We lived with our parents until we got married because that made better financial sense.
When it came to buying a place of our own, we baulked at property prices here — after all, Singapore was reported to have the second-most expensive housing market in the world with an average property price of US$874,372 (about S$1,180,400 based on currency conversions at the time of the report), just behind Hong Kong. A $78 million home in Sentosa Cove even made it to Robb Report’s article on the most expensive homes in the world for sale.
And yet, despite these reports on sky-high private property prices, most of us still manage to buy a home within our budget — that’s the beauty of public housing in Singapore, which is something we often take for granted.
This National Day, here are 5.5 things (because Singapore turns 55 this year) we are thankful for in our public housing system:
#1 Most young Singaporean families can afford a roof over their heads
While private property prices can reach 7- or even 8-figure sums, it’s still pretty insane to shell out a 6-figure sum for a home… or is it?
Thankfully, with Singapore’s public housing scheme, we are able to take up to 25 years to pay off the purchase; and if we’ve been working for a time, we can use the money in our Central Provident Fund (CPF) account to fund the down payment and repayments.
For example, if you’re looking at the August HDB BTO launch, a 4-room flat in Woodlands starts from $250,000. Here’s what the calculation looks like if you’re getting the BTO flat with a partner:
- Combined existing CPF funds — $50,000
- Monthly repayment over 25 years (on the remaining $200,000) — $908 or $454/person
- Monthly salary per person — $2,500
- Monthly CPF contribution to Ordinary Account — $575.08
This means that the couple’s CPF monies will be more than enough to cover the monthly repayments = no cash outlay.
According to gov.sg, about 80 per cent of first-time homebuyers are able to pay their monthly mortgage instalment fully with CPF.
In addition, public housing BTOs are also heavily subsidised. Check out this quick comparison of recent HDB BTO launches and HDB resale prices in the same areas:
Woodlands
From $244,000
$340,000
Ang Mo Kio
From $451,000
$446,000
Geylang
From $429,000
$504,000
Tampines
From $394,000
$447,000
Punggol
From $287,000
$462,000
There are exceptions to the rule, but generally HDB BTO prices are at least 10-35% cheaper than HDB resale flat prices (and a fraction of private property prices). There’s also the option of renting a HDB flat.
Even if you can’t afford to buy or rent a HDB flat just yet, there are schemes to ensure you won’t be left homeless, such as the HDB Public Rental Scheme where monthly rents start from $26.
#2 In addition to subsidies, there are also CPF housing grants
Oh, I haven’t mentioned that the HDB public housing prices above have yet to include CPF housing grants (aka HDB grant).
Here’s a quick look at some of the grants available to HDB resale and BTO flat buyers:
Enhanced CPF Housing Grant (EHG) for first-timer applicants
Up to $80,000
Up to $80,000
Family Grant
Up to $50,000
N/A
Proximity Housing Grant
Up to $30,000
N/A
Singles Grant
Up to $25,000
N/A
Source: HDB
In a nutshell, the Enhanced CPF Grant or EHG applies across the board for both types of HDB flats. How much one can receive depends on their household income, remaining lease of the flat, and other factors.
The other schemes — Family Grant, Proximity Housing Grant (PHG) and Singles Grant — apply only for resale HDB flat purchases.
For PHG, your resale flat needs to be within 4km of your parents/children, even if they don’t stay in public housing. The grant amount increases if you stay with your parents. And yes, it stacks with other grants that you’re eligible for.
The Family Grant is for first-time applicants who are a family/married or engaged couple looking to buy a resale HDB flat together. Those flying solo can benefit from the Singles Grant if they buy a HDB resale flat.
Let’s revisit our example above:
- 4-room flat in Woodlands — starts from $250,000
- Both first-timer applicants
- Monthly salary per person — $2,500 ($5,000 household income)
- Grant(s) available (buying with spouse) — Enhanced CPF Grant of $45,000
- Combined existing CPF funds — $50,000
- Monthly CPF contribution to Ordinary Account — $575.08 per person
- Monthly repayment over 25 years (now on the remaining $155,000) — $704 or $352/person
With the EHG, the couple is able to accumulate more CPF monies per month.
#3 Public housing estates are clean and well equipped
We have our grouses with dirty/messy neighbours from time to time, but I must say that our estates and public areas are kept pretty pristine by our respective town councils and NEA. Town Councils also make sure that routine repairs, maintenance works, grass-cutting and so on are also carried out.
HDB, Singapore’s public housing developer, also has in place plans for smart and sustainable living. Some of these initiatives include the planting of more greenery, encouraging an eco-friendly lifestyle and implementing sensors to collect data and pre-empt any issues.
Not forgetting… amenities and award-winning designs
Every 5 years, Singapore has a General Election… and usually, upgrading plans are also announced. The most recently announced improvements (during the 2020 General Election) outlined senior-friendly amenities, sheltered linkways, drop-off porches, new fitness corners, community and green spaces, as well as a fresh coat of paint for HDB blocks there.
And who’s to say that public housing has to be blah and boring? Every year, a slew of HDB projects win design, construction and engineering awards. The Construction Quality Assessment System (CONQUAS) score for HDB projects also stands at 92, which exceeds the average CONQUAS score for private properties.
It was also reported that new HDB BTO flats will now come with condo-like finishings at a fraction of the cost.
#4 All HDB flats get upgraded twice
It’s not just about your HDB block getting a new coat of paint or a new fitness corner. There are also upgrading plans in place to keep all HDB flats safe and liveable, in which essential works such as repairing spalling concrete, replacing pipe sockets with a new clothes drying rack, and upgrading the electrical load are done.
This is called the HIP or Home Improvement Programme and is carried out not once, but twice in each HDB flat’s lifespan — the first round when your flat is about 30 years old, and the second round (HIP II) when your flat is about 60 to 70 years old.
There are also optional improvements such as upgrading your existing bathrooms, and Enhancement for Active Seniors (EASE programme) where elderly-friendly fittings are installed. Yes, we will need to pay for these improvement works, but the government subsidises up to 95% of the cost.
Apart from upgrading, the government also redevelops ageing HDB flats through the Voluntary Early Redevelopment Scheme or VERS. This voluntary scheme will be offered to selected precincts that are at least 70 years old.
Home owners will be able to benefit from redevelopment before their 99-year HDB lease expires — residents will first vote if they wish to return their flats to the government, and if the vote passes, the residents will be compensated for their flats.
#5 With TDSR and MSR, the government makes sure buyers don’t overspend on property
It sucks to have a limit on anything, and that’s why some of us complain about the TDSR (total debt servicing ratio), MSR (mortgage servicing ratio) and LTV (loan-to-value ratio). These determine how much we are eligible to borrow for our property purchase.
But hey, having these limits in place are actually good — it makes sure home buyers don’t overspend on a property they cannot afford and go spiralling into debt. It’s a good restriction that seeks to look out for our financial wellbeing and ensures we borrow responsibly.
However, in times of need (such as the ongoing COVID-19 situation) the government also recognises the need to relax the restrictions a little. TDSR, MSR and LTV restrictions have been removed until 31 Dec 2020 for residential property loans.
Bonus! #5.5: Many Singaporeans manage to turn a profit after selling their first HDB home
Here’s one more housing related thing to be thankful for this National Day. And just because it’s Singapore’s 55th birthday, it shall be numbered as such — #5.5.
When we buy a HDB BTO, some of us make it our forever home due to its ideal location, good amenities (current and future), or because it’s near our parents. Others buy the HDB BTO with the best resale value, so that after HDB’s minimum occupancy period (MOP) is up, it’s time to sell the flat.
Yup, because of the subsidised prices we get on our HDB BTO flat, many who sell after the 5-year MOP will turn a tidy profit. As you can see from an earlier point, HDB resale flat prices are generally higher than the initial BTO purchase price. This makes it easier for them to either upgrade to a private property, or to use the extra cash for investment.
Let’s return to our favourite Woodlands couple. Let’s say they decide to sell their 4-room BTO after the MOP is up:
- Purchase price — $205,000 (inclusive of grants)
- Resale price — $340,000
- Profit — $135,000
They could potentially earn $135,000, but they will have to take into account other factors such as purchase price of their next home, any associated fees and charges and so on before calculating their final profit.
Other ways to monetise your HDB flat
If you don’t plan to sell, other ways to use your HDB flat as a source of income are to:
- Rent out your spare bedroom(s)
- Rent out your entire flat (if you have somewhere else to stay, such as with your parents or if you need to be based overseas for awhile)
- Make use of the Lease Buyback Scheme for cash payouts
- Right-size with the Silver Housing Bonus
Staying thankful this Singapore National Day 2020
I’m not going to paint a rosy picture of only sunbeams and rainbows — I do agree that there is always room for improvement and that not all housing policies in Singapore are perfect.
But we are all of 55 years young as a nation, and progress is definitely something we keep on pursuing.
When it comes to property, I feel blessed. Just think about it, for a small island-country we have the luxury of a multitude of housing options to choose from and access to a slew of support measures such as government schemes/grants and bank loans.
For what it’s worth, I do feel thankful for what Singapore offers, and that I feel safe and secure with a roof above my head and food on my plate.
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This article was written by Mary Wu, who hopes to share what she’s learnt from her home-buying and renovation journey with PropertyGuru readers. When she’s not writing, she’s usually baking up a storm or checking out a new cafe in town.
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