SINGAPORE: Homeownership is a significant milestone for many Singaporeans, however, for lower-income households, purchasing a home can seem like a daunting financial challenge.
The good news is that this goal is not out of reach even for households earning $1,500 a month. According to Dollars and Sense, it is possible for households in Singapore with a monthly income of $1,500 to purchase 2-room Build-to-Order (BTO) flats with the help of Housing Development Board (HDB) grants.
There are various housing grants, such as the CPF Enhanced Housing Grant (EHG), available to lower and middle-income households purchasing their first HDB flat.
The CPF Enhanced Housing Grant (EHG) provides a subsidy of up to $120,000. Households earning a monthly income of less than $1,500 can receive the maximum grant amount, while those earning between $1,500 and $2,000 are eligible for $110,000.
Dollars and Sense looked into whether households earning $1,500 a month can afford a 2-room BTO flat or a resale flat, and which option is more practical.
According to statistics from Singstat, around 6.2% of Singapore households with an employed person have a monthly income of less than $2,000. For a Singapore household with an average monthly income of $1,500, first-time buyers would be eligible to receive $110,000 in EHG.
Costs of 2-Room BTO Flats
Singapore’s leading personal finance website cited a 2-room Flexi flat in Tampines as an example. Launched in the June 2024 BTO exercise, the flat is about 46 square metres (495 square feet) and has a median price of $152,500, with prices ranging from $67,000 to $238,000. With the $110,000 EHG, the price could be lowered to just $42,500.
If the household takes an HDB loan at 2.6% interest over 20 years, their monthly repayment would be $227. Since they earn $1,500 a month and get $345 in CPF contributions, this would cover the repayment fully, requiring no extra cash.
Overall, a household with this income can afford a flat priced up to $174,000 when considering the grant and loan.
Here are median prices for some 2-room BTO flats from the June 2024 BTO launch:
- Jurong East: $122,500 (ranging from $45,000 to $200,000)
- Tampines: $152,500 (ranging from $67,000 to $238,000)
- Woodlands: $116,000 (ranging from $43,000 to $189,000)
- Yishun: $107,500 (ranging from $45,000 to $170,000)
With the prices mentioned, buyers with a monthly household income of $1,500 can afford a 2-room flat in most BTO locations.
Note that the price range includes flats with different lease lengths, so the median price might not apply to a 99-year lease flat.
Buying an HDB Resale Flat
For those considering an HDB resale flat, the grants differ. First-time buyers of resale flats are eligible for an $80,000 CPF housing grant for 2- to 4-room flats. They could also get a $20,000 Proximity Housing Grant (PHG) if they live within 4km of their parents’ or child’s home, or $30,000 if they plan to live with them.
For instance, a household buying a 2-room resale flat near their parents would be eligible for the $80,000 CPF housing grant, $20,000 in PHG, and $110,000 in EHG, totalling $210,000 in housing grants.
With the same loan conditions, a household could afford a 2-room resale flat priced up to $274,000 without needing extra cash. However, resale flats typically cost more. As of the second quarter of 2024, the median price for a 2-room resale flat in Yishun was $327,500. Listings on PropertyGuru indicate that a buyer might need around $300,000 for a resale flat.
To buy a $300,000 flat, a buyer would need to borrow around $90,000. This would mean a monthly repayment of about $481 over 20 years at a 2.6% interest rate. With a $345 monthly CPFOA contribution, the household would need to pay an additional $136 per month.
Which option is more affordable? BTO or Resale?
While resale flats offer more flexibility in location and a shorter waiting time, they are usually more expensive. For a low-income household earning $1,500 a month, BTO flats are generally more affordable and sustainable in the long term. Even though resale flats come with more grants, their higher costs can strain a household’s budget, making BTO flats a smarter long-term choice. /TISG
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