Can You Still Afford A Mature-estate HDB Flat In 2020?

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. 

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. 

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. 

If you need help with the financing aspects, drop us a message on Stacked; we can help you out. Otherwise, do follow us on Stacked, for more updates on prices in both the HDB market, and Singapore’s private property market.