Here is the salary you need to earn to afford these houses in Singapore [2022 Edition]
HDB resale prices and private home prices climbed for the 8thand consecutive quarter based on the latest HDB and URA flash estimates, published on April 1, 2022.
A rise in property prices is both a boon and a curse in a country like Singapore, where home ownership stands at around 90%. Existing homeowners stand to gain from asset appreciation, while first-time homebuyers feel left out of a rising real estate market.
While we should look at home affordability holistically from a borrower’s ability to finance the property, in this article we attempt to look at it from a salary perspective.
We have calculated how much a couple should theoretically earn to afford the different types of residential properties in Singapore.
Eliminate assumptions from our calculations:
Before we dive into the assumptions, we remind readers that the figures presented are an approximation. We invite readers to do their own calculations before committing to a real estate purchase.
Our assumptions:
- We have not taken into account the housing aid available to first-time buyers of HDB apartments.
- We take the minimum down payment required for the purchase of the residential property, regardless of the borrowers’ loan eligibility and financial capacity.
- Based on the latest cooling HDB measures put in place on 16 Dec 21, the HDB loan to value ratio is 85%. Therefore, the deposit for HDB apartments is calculated on the basis of a 15% deposit.
- A 25% deposit is applied for Executive Condominiums (EC) and private properties as HDB loans are not applicable.
- We assume that borrowers have no loans other than the home loan they intend to take. Therefore, they could maximize the mortgage service ratio (MSR) and the total debt service ratio (TDSR).
- The MSR rate of 30% is used to determine the required salary for HDB apartments.
- A 55% TDSR rate is used to determine the required salary for executive condominiums (whose minimum tenure has been met) and private properties.
- We assume a mortgage term of 25 years with an interest rate of 2.6% for HDB apartments and 1.6% for EC apartments and private properties to determine monthly repayments.
- For the required salary, we assume that both husband and wife work and earn the same salary.
Finally, we do not take any other costs into consideration, including agent fees, stamp duty, legal fees, renovations or other related expenses typically incurred in purchasing a property.
The salary we need to buy our dream house
| Housing type | Median home resale price | Minimum deposit | Monthly repayments | Average salary per spouse |
| HDB 3 pieces | $360,000 | $54,000 | $1,388 | $2,615 |
| HDB 4 pieces | $554,000 | $83,100 | $2,136 | $3,560 |
| HDB 5 pieces | $652,000 | $97,800 | $2,514 | $4,190 |
| HDB Executive | $695,000 | $104,250 | $2,680 | $4,467 |
| Executive Condominiums (EC) | $1,055,000* | $263,750 | $3,202 | $2,915 |
| Condominiums (OCR) | $1,130,000* | $282,500 | $3,429 | $3,118 |
| Condominiums (RCR) | $1,470,000* | $367,500 | $4,461 | $4,056 |
| Condominiums (CCR) | $2,350,000* | $587,500 | $7,132 | $6,484 |
| terrace house | $3,150,000* | $787,500 | $9,560 | $8,691 |
| Twin house | $4,600,000* | $1,150,000 | $13,960 | $12,691 |
| Bungalow | $9,700,000* | $2,425,000 | $29,438 | $26,762 |
| Good Class Bungalow (GCB) | $30,303,000# | $7,575,750 | $91,966 | $83,606 |
* Figures are based on URA transactions recorded from January to December 21.
#The figure represents the average price of a GCB for 2021.
HDB Apartments
Median sale prices for HDB resale apartments were calculated based on HDB’s 4Q2021 resale statistics. Compared to our article in 2021, average HDB resale prices have increased between 7% and 15%. Nevertheless, the minimum salary required to finance one of the three types of HDB apartments ranges between $2,615 and $4,467 per spouse. This corresponds to MOM’s median income in 2021 of $4,680.
Read also : HDB Price Guide: 5 Cheapest HDB Domains for 2022
Executive Condominium
Similarly, the median price of the Executive Condominium (EC) increased by approximately 5.5% compared to last year. We calculated the median price based on the resale transactions provided by the URA for 2021. Interestingly, we find that the salary required to buy a resale EC apartment is lower than that required for a 4-room HDB apartment or more.
The reason for the high wage requirement for HDB apartments is due to the 30% Mortgage Service Ratio (MSR) that HDB apartment buyers are subject to. While EC buyers are allowed to use up to 55% of their income for loan repayment due to TDSR rules.
TDSR rules only apply to ECs who have completed their minimum occupancy period. Otherwise, MSR rules will apply.
Read also : Complete Beginners Guide to Buying a New Executive Condominium (EC) in Singapore
Private condominium
You may notice that the salary required to buy a condominium apartment in the Rest of Central Region (RCR) or Out of Central Region (OCR) is lower than the salary required to buy an HDB Executive Apartment. This is again due to the higher debt financing allowed for private property buyers compared to HDB buyers.
Although the salary required to buy a condominium in the OCR or RCR is lower than that of a 5 bedroom or an executive apartment, they cost almost double. While it is theoretically possible for a couple earning the minimum wage of $4,100 each to purchase a condominium, in reality it may be too much for their finances.
Read also : CCR, RCR, OCR: what do these district classifications mean when researching your property purchase?
Land ownership
Land properties are categorized in three ways: terrace units, semi-detached units, and single or single-storey units. We derived the median price based on one-year (2021) resale transaction records available on the URA website.
The minimum monthly salary required to purchase a “dream” land property is between $8,691 and $26,762 per spouse. The upper end of this figure is near MOM’s average monthly household income from work in 2021, which is about $25,425 per residency household.
Again, it is theoretically possible for a couple earning around $17,000 ($8,691 x 2 spouses) to own land, but they may be unrealistically overstretching their finances.
Read also : Complete Guide to Buying Land Property in Singapore
Good Class Bungalows (GCB)
Finally, for the crown jewels of residential properties in Singapore, the GCBs, we derived the average price based on the report from CBRE. A total of 99 GCBs were traded in 2021, with a total volume of $3 billion. To qualify for a coveted GCB in Singapore, you must earn at least $83,606 per spouse.
In reality, most buyers in this category will likely earn at least 10 to 15 times that amount to afford a down payment of $7.5 million and a monthly mortgage of close to $100,000.
Read also : 4 reasons why a classy bungalow (assuming you can afford it) is a great investment
Only buy what you can afford
The purpose of this exercise is to bring the possibilities of home ownership to those who aspire to it. Most of us may feel intimidated by rising house prices, and we may feel embarrassed to take steps to achieve our dream of home ownership. This theoretical exercise can be used as a starting point to determine the salary required to afford the desired property.
At the same time, we also advocate not maximizing your gross income on your mortgage. Taking the maximum loan leaves little room for error, especially when unforeseen circumstances such as job losses or sudden interest rate hikes occur.
As we mentioned at the beginning of the article, the affordability of any property should be viewed holistically. One way to test affordability is to use the 3-3-5 rule. You can check your financial situation to buy a property according to the three criteria. This way you can avoid overworking yourself.
Read also : 3-3-5 HDB Apartment Buying Rule: How Much Can Singaporeans Really Afford?
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