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Can you still afford a mature-estate HDB flat in 2020?

Can you still afford a mature-estate HDB flat in 2020?
PHOTO: Stackedhomes

It’s BTO launch time, and once again your eyes are being drawn to places like Bidadari and Bishan. But a part of you may be thinking: this is all a fantasy right?

Even if the balloting works out, the flats there look way out of budget. And if it’s a resale flat you need, well…you’re probably recalling all the stories of million-dollar flats in those areas. 

Well perk up, because you might be wrong. Sometimes Singaporeans tend to overestimate the cost of HDB housing.

We’ve worked out the likely amount you need to purchase an HDB flat in some of the hottest estates – both new flats and resale. The level of affordability may surprise you: 

Let’s start with the mature towns available in the November 2020 launch. 

*Prices from HDB November 2020 BTO launch 

Town  Project  Flat Type  Price excluding grants  Est. price after grants 
Toa Payoh  Bartley Beacon 

ParkView @ Bidadari 
3-room  From $324,000  From $264,000 
4-room  From $466,000  From $421,000 
5-room  From $627,000  From $597,000 
Bishan  Bishan Ridges  2-room Flexi*~ 
(40-year Lease) 
From $121,000  From $41,000 
3-room  From $374,000  From $314,000 
4-room  From $528,000  From $483,000 
Tampines  Tampines Green Emerald+  2-room Flexi*  From $130,000  From $50,000 
4-room  From $334,000  From $289,000 
5-room  From $460,000  From $430,000 

How much do you need in CPF and earnings to buy one of these flats? 

As a reference, we will use the base prices given for each of the flats. We will exclude the grants, as the grant amount varies for each buyer.

Purchasing the flats using an HDB loan

An HDB loan allows for financing of up to 90 per cent*, and a minimum down payment of 10 per cent. The down payment can be made via cash or CPF. 

In addition, an HDB loan has a 30 per cent Mortgage Servicing Ratio (MSR). Note that a projected interest rate of 3.5 per cent is used to calculate the MSR, and not the actual HDB loan interest rate (2.6 per cent). 

For all of the following we will assume the use of a 25-year loan, which is the maximum loan tenure to secure full financing. 

Note that the Buyers Stamp Duty (BSD) is payable using CPF. 

*HDB is not required to give you the maximum financing, and the loan amount may vary based on factors such as loan tenure and age.

Toa Payoh HDB

For Toa Payoh 3-room flats

Price without grants: $324,000
BSD: $4,680
Maximum loan amount: $291,600
Minimum down payment: $32,400
Monthly home loan repayment (at 2.6 per cent per annum): $1,323
Required monthly household income for MSR: Approx. $4,867
Est. total paid : $433,950 (total interest paid = $105,270)

For Toa Payoh 4-room flats: 

Price without grants: $466,000
BSD:$8,580
Maximum loan amount: $419,400
Minimum down payment: $46,600
Monthly home loan repayment (at 2.6 per cent per annum): $1,903
Required monthly household income for MSR: Approx. $7,000
Est. total paid: $625,987 (total interest paid = $151,407)

For Toa Payoh 5-room flats: 

Price without grants: $627,000
BSD: $13,410
Maximum loan amount: $564,300
Minimum down payment: $62,700
Monthly home loan repayment (at 2.6 per cent per annum): $2,561
Required monthly household income for MSR: Approx. $9,417
Est. total paid: $844,127 (total interest paid = $203,717)

Bishan HDB

For Bishan, we have excluded 40-year flexi-flats as home loans are not usually available for these; if you intend to purchase short-lease flats, do speak to HDB regarding means of financing.

For Bishan 3-room flats: 

Price without grants: $374,000
BSD: $5,820
Maximum loan amount: $336,600
Minimum down payment: $37,400
Monthly home loan repayment (at 2.6 per cent per annum): $1,528
Required monthly household income for MSR: Approx. $5,617
Est. total paid by end of loan: $501,335 (total interest paid = $121,515)

For Bishan 4-room flats: 

Price without grants: $528,000
BSD: $10,440
Maximum loan amount: $475,200
Minimum down payment: $52,800
Monthly home loan repayment (at 2.6 per cent per annum): $2,156
Required monthly household income for MSR: Approx. $7,930
Est. total paid: $709,991 (total interest paid = $171,551)

Tampines HDB

For Tampines 2-room flats:

Price without grants: $130,000
BSD: $1,300
Maximum loan amount: $117,000
Minimum down payment: $13,000
Monthly home loan repayment (at 2.6 per cent per annum): $531
Required monthly household income for MSR: Approx. $1,953
Est. total paid: $173,538 (total interest paid = $42,238)

For Tampines 4-room flats: 

Price without grants: $334,000
BSD: $4,880
Maximum loan amount: $300,600
Minimum down payment: $33,400
Monthly home loan repayment (at 2.6 per cent per annum): $1,364
Required monthly household income for MSR: Approx. $5,017
Est. total paid: $447,399 (total interest paid = $108,519)

For Tampines 5-room flats:

Price without grants: $460,000
BSD: $8,400
Maximum loan amount: $414,000
Minimum down payment: $46,000
Monthly home loan repayment (at 2.6 per cent per annum): $1,879
Required monthly household income for MSR: Approx. $7,677
Est. total paid: $617,858 (total interest paid = $149,458)

Purchasing the flats using a bank loan 

Perhaps HDB deems your income to be on the high side, or perhaps you want to take advantage of low interest rates (e.g. you intend to sell in five years and upgrade, so just need to keep interest as low as possible for this near term). 

In such a situation, you could use a bank loan. This provides maximum financing of up to 75 per cent.

The first five per cent of the flat must be paid in cash, and the remaining 20 per cent can come from CPF. 

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Bank loans require you to meet both the MSR and the Total Debt Servicing Ratio (TDSR).

The main difference is that the TDSR caps your home loan – plus all other debts, such as car loans, education loans, etc. – at 60 per cent of your monthly income. 

Again, note that a projected interest rate of 3.5 per cent is used for MSR and TDSR calculations. In actuality, the current mortgage rate is around 1.3 per cent.

While the required income level appears lower for banks, remember that this is because a larger down payment is required (you’re borrowing less). 

Note that bank home loans rates fluctuate more than HDB loans. As such, there is no way to determine the exact amount of interest paid by the end of the loan. 

We also assume you use a loan tenure of 25 years in the following scenarios: 

Toa Payoh HDB

For Toa Payoh 3-room flats: 

Price without grants: $324,000
BSD: $4,680
Maximum loan amount: $243,000
Minimum down payment: $81,000 ($16,200 in cash, up to $64,800 from CPF)
Monthly home loan repayment (at 1.3 per cent per annum): $949
Required monthly household income for MSR: Approx. $4,057 for MSR
Est. total paid : $370,433 (total interest paid = $41,753)

For Toa Payoh 4-room flats: 

Price without grants: $466,000
BSD: $8,580
Maximum loan amount: $349,500
Minimum down payment: $116,500 ($23,300 in cash, up to $93,200 from CPF)
Monthly home loan repayment (at 1.3 per cent per annum): $1,365
Required monthly household income for MSR: Approx. $5,833
Est. total paid by end of loan : $534,632 (total interest paid = $60,052)

For Toa Payoh 5-room flats: 

Price without grants: $627,000
BSD: $13,410
Maximum loan amount: $470,250
Minimum down payment: $156,750 ($31,250 in cash, up to $125,400 from CPF)
Monthly home loan repayment (at 1.3 per cent per annum): $1,837
Required monthly household income for MSR: Approx. $7,847
Est. total paid: $721,210 (total interest paid = $80,800)

Bishan HDB

For Bishan 3-room flats: 

Price without grants: $374,000
BSD: $5,820
Maximum loan amount: $280,500
Minimum down payment: $93,500 ($18,700 in cash, up to $74,800 from CPF)
Monthly home loan repayment (at 1.3 per cent per annum): $1,096
Required monthly household income for MSR: Approx. $4,680
Est. total paid: $428,016 (total interest paid = $48,196)

For Bishan 4-room flats: 

Price without grants: $528,000
BSD: $10,440
Maximum loan amount: $396,000
Minimum down payment: $132,000 ($26,400 in cash, up to $105,600 from CPF)
Monthly home loan repayment (at 1.3 per cent per annum): $1,547
Required monthly household income for MSR: Approx. $6,607
Est. total paid by end of loan: $606,482 (total interest paid = $68,042)

Tampines HDB

For Tampines 2-room flats: 

Price without grants: $130,000
BSD: $1,300
Maximum loan amount: $97,500
Minimum down payment: $32,500 ($6,500 in cash, up to $26,000 from CPF)
Monthly home loan repayment (at 1.3 per cent per annum): $381
Required monthly household income for MSR: Approx. $1,627
Est. total paid by end of loan: $148,053 (total interest paid = $16,753)

For Tampines 4-room flats:

Price without grants: $334,000
BSD: $4,880
Maximum loan amount: $250,500
Minimum down payment: $83,500 ($16,700 in cash, up to $66,800 from CPF)
Monthly home loan repayment (at 1.3 per cent per annum): $978
Required monthly household income for MSR: Approx. $4,180
Est. total paid: $381,922 (total interest paid = $43,042)

For Tampines 5-room flats:

Price without grants: $460,000
BSD: $8,400
Maximum loan amount: $345,000
Minimum down payment: $115,000 ($23,000 in cash, up to $92,000 from CPF)
Monthly home loan repayment (at 1.3 per cent per annum): $1,348
Required monthly household income for MSR: Approx. $5,756
Est. total paid: $527,679 (total interest paid = $59,279)

For an easy comparison, here’s the HDB vs bank loan side by side. 

Toa Payoh 3-Room  HDB Loan  Bank Loan 
Monthly loan  $1,323  $949 
Total Paid  $433,950  $370,433 
Toa Payoh 4-Room  HDB Loan  Bank Loan 
Monthly loan  $1,903  $1,365 
Total Paid  $625,987  $534,632 
Toa Payoh 5-Room  HDB Loan  Bank Loan 
Monthly loan  $2,561  $1,837 
Total Paid  $844,127  $721,210 
Bishan 3-Room  HDB Loan  Bank Loan 
Monthly loan  $1,528  $1,096 
Total Paid  $501,335  $428,016 
Bishan 4-Room  HDB Loan  Bank Loan 
Monthly loan  $2,156  $1,547 
Total Paid  $709,991  $606,482 
Tampines 2-Room  HDB Loan  Bank Loan 
Monthly loan  $531  $381 
Total Paid  $173,538  $148,053 
Tampines 4-Room  HDB Loan  Bank Loan 
Monthly loan  $1,364  $978 
Total Paid  $447,399  $381,922 
Tampines 5-Room  HDB Loan  Bank Loan 
Monthly loan  $1,879  $1,348 
Total Paid  $617,858  $527,679 

As an aside, here are the resale prices for these areas, in case your balloting didn’t go as planned: 

*All data from Square Foot Research, based on Oct 2020 resale prices. We use the following size approximations:

2-room = 485 sq. ft.

3-room = 700 sq. ft.

4-room = 969 sq. ft.

5-room = 1,184 sq. ft.

Note that flats built in the 1990’s or before tend to be larger than the above.

Estate  2-room  3-room  4-room  5-room 
Toa Payoh  –  $380 psf / $266,000  $617 psf / $597,873  $477 psf / $564,768 
Bishan  –  $481 psf / $336,700  $558 psf / $540,702  – 
Tampines*  519 psf / $251,715*  $437 psf / $305,900  $439 psf / $425,391  $434 psf / $513,856 

*Pricing for 2-room flats in Tampines may not be reliable due to low volume of transactions; there were only two units transacted for October 2020 

Based on the above, the average Singaporean is actually in a position to afford a mature-estate HDB. 

Note that in the examples above, prices are before grants. Once we factor in benefits like the Enhanced Housing Grant (EHG), the average Singaporean could afford, say, a 3-room flat in Toa Payoh even with a sole breadwinner; this is based on the reported median salary of $4,563 per month. 

Dual income families can likely meet the MSR even for 5-room units in mature estates, after grants. 

However, there are two sticky issues that could get in the way 

For Singaporeans who have to take a bank loan, the obstacle is seldom the MSR or TDSR. The main gripe is the initial five per cent down payment, which cannot be covered by CPF or any bank loans.

There’s no way around this other than to save up, borrow from parents, etc. 

The second issue comes with resale flats. Unlike BTO flats, resale flats are not always priced exactly the same as the valuation.

There’s a chance of Cash Over Valuation (COV) , such as if the seller wants $550,000 for a flat valued at $540,000. 

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COV is never covered by the housing loan, be it from the bank or HDB. As such, buyers of resale flats need to have extra cash on hand, to contend with this uncertainty.

Note that, in the prices given above, we don’t know if HDB’s valuation will be below the averages shown (HDB doesn’t publish COV data). 

Which is why buyers of resale flats should not only be prepared to pay more overall, but also to have more immediate cash-in-hand.

In general, it’s best to have around $10,000 to $15,000 more than the asking price, in case HDB’s valuation turns out to be lower than what the seller asks.

This article was first published in Stackedhomes.

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