Our Government defines affordability as not using more than 35% of your gross monthly household income to pay for the monthly installment.
Let’s look at the scenario for typical young couple that have recently graduated from University and been working for 2-3 years.
Combined monthly income: $7,000, take home pay = $5,600 (80%)
Amount that goes to Ordinary Account: $1,610 (23%)
Suppose they buy a flat at $600k. After emptying their Ordinary Account, they have to take a loan for $520k @ 2.6% over 30 years.
Monthly Payment = $2080 (about 30% of their gross household income)
From
CPF, we have $,1610 (23% of gross income)
Cash Top Up: $470
Take home pay of the couple after topping up the cash component
= $5600 – 470
= $5,130
Sounds quite okay…
But… what if say, the wife kenna retrenched one day or wants to be a homemaker. Leaving the husband to finance the flat alone. Assuming the husband earns $4k monthly.
Monthly Payment = $2080
From
CPF, we have $920
Cash Top Up: $1,160
Take home pay of the couple after topping up the cash component
= $3,200– $1,160
= $2,040
Is it a “comfortable” figure? We will come back to that again in a short while.
What
HDB might say in response to my post…
1)They can always buy a cheaper flat.
The truth is there ARE flats costing more than half a million that are supposedly meant for applicants with household income below $8k. And if a couple earning $7k can barely afford it, who can?
2)Why do you assume they will get retrenched along the way? Why plan for an event that may not happen? If you think like that, you will never be able to afford a flat.
I am sure if you drive, you do keep a spare tyre in your car boot. No?
Further more, it used to be that households with a single income earner were able to finance a flat alone. The figures show clearly flats are no longer “as affordable”. I just hope our government will acknowledge it instead of dismissing our concerns with a wave of the hand.
The government is always telling us the importance of having children, staying near your parents and supporting them etc. We must also try to save and plan for retirement. Seems like mission impossible in Singapore nowadays. How to do that with $2,040? One of my friend told me he’s planning to get a car, cos his mother is getting old and he’s also expecting a 2nd child. I told him to forget about it. If the young couple in our example has a family car too, they have like $1,000 left per month!
3)Look, there are flats that cater to different budgets. We are going to repeat ourselves again, just get a cheaper flat! Maybe at a less central location. Don’t be picky!
Yah… we are going to buy something that will take us 30 years to finance. And we are not supposed to be picky… hmm… For Pete's sake, we are not buying vegetables at the market, if the vegetables don't taste good, just throw!
The reason why I am looking at flats in central location is because, my family lives at Toa Payoh, while my fiancee's family stays near Outram. I just want a place near to them.
I am not looking at buying a luxurious condo. I just want a simple 4 room flat that is near to either on of our families! Is it too much to ask for?