Recently, one has seen more resale HDB properties going for above $1million. While this continues to be an outlier, the cascading effect is the rise in prices for new private property.
Starting prices of new launches today
At the time of writing, new launches below $1million are a rare commodity. Realistically these are the starting prices of current new launches today
1 Bedroom - $1 million
2 Bedroom - $1.15 million
3 Bedroom - $1.4 million
4 Bedroom $1.85 million
The 3 Bedroom will be a common option for HDB upgraders as well as new home buyers looking for a longer-term investment. As such we will use $1.5million as the criteria to search for a 3 Bedroom.
The question in most minds will be how much I have to earn to afford the $1.5 million property. We will attempt to break it down by age based on the following options
This is the first private property purchased
Buyers would have sufficient case to cover the first 25% of the property, stamp duties and lawyer's fees ( approximately 29% in total)
Maximum Loan of 75%, maximum age of Loan at 65 or 30 years whichever is shorter
The calculation is based on a single person. For dual-income families, the income required will be halved.
No existing debts for the individuals
Income excludes annual bonuses or other bonus
Additionally, current restrictions on loans apply
TDSR of 55%
How much do you have to earn to afford a $1.5 million property?
Properties Price : $1,500,000
25% cash : $375,000
75% Loan : $125,000
Misellaneous additional cash ( 4%) : $60000
At age 25: $9,186 ($4593 for dual income)
At age 35 : $9,186 ( $4593 for dual income)
At age 45 : $11,863 ( $5932 for dual income)
At age 55: $20,226 ( $10,113 for dual income)
Some observations to take note
At age 25-35, the amount of income remains unchanged as you can take the maximum loan tenure of 20 years. This implies the best time to commit to a property to gain the maximum loan at the lowest income will be below 35 years old
You would need minimum cash of $435,000 even if you meet the income criteria.
As one gets older, the runway for loans gets shorter. As a result, one needs to earn more in order to take the same amount of loan.
It is prudent to take a smaller loan as you need to set aside funds for other expenses such as renovation, car loans, emergencies and any other expenses.
The calculation can apply to new and resale properties. Do take note to include a bigger buffer for renovation for resale properties
While many had lamented the rise of property prices in terms of PSF, the overall quantum looks affordable. For many the main obstacle will not be the income but the cash needed for the property.
To have a clearer picture, it will be best to engage a property consultant to work through the numbers with you. We provide an obligation free property financial planning to our readers.
Whatsapp us at 9695 0900 for an appointment.