Too expensive to move out?
Moving out of your parent’s house right out of college is a pretty common phenomenon in the U.S. And sure enough the fact that many of us Singaporeans choose to live with our parents until we are financially stable enough to buy our first home has peaked the curiosity of many foreigners. There are many words I’d use to describe Singapore’s cultural relationship with the real estate market, but normal isn’t one of them. How about exploitive, irrational, terrifying, twisted beyond all recognition?
Well, anything but normal. Not normal in comparison to other cities around the world, not normal compared to principles of economics we learnt about in secondary school, not normal in its social and spiritual effects on its participants.
Market commentary like this is only useful if you can translate it into what it means for your own purchase: your entry price, holding period and exit options.
That's where many buyers get stuck. General market insights rarely tell you whether a specific unit, at a specific price, is the right decision for your circumstances.
Over time, that's also why we decided to work with agents who shared the same data-driven and advisory-led approach behind our editorial, consultants who could help readers think through decisions more objectively, rather than simply push transactions.
Today, the team has worked with more than 2,000 clients across over $5B in property transactions.
If you are a recent arrival to our majestic lion city, you may feel more acutely than those of us who have lived here our whole lives. Unlike large metropolitan cities like New York, where its inhabitants engage in a constant battle of Buying vs. Renting over and over for decades. Singapore’s market is contrarian in that there is only one resounding note in this symphony – BUY. (I am generalising of course, but our rental market is largely catered to expatriates than the typical Singaporean.
HDB Prices in the past
Now, you could chalk this up to Asian culture and our ingrained sense of thriftiness or that you absolutely love living with your parents until you are 35. But the reality is that these are all symptoms of one very obvious condition – it is expensive living in Singapore.
In the 1980s, the price of a 3-room HDB flat in Queenstown was $20,000. Now, the average salary of say… an operator in an industrial factory (very common job in that period) in Singapore then was around $500 a month or $6,000 annually. That means that the typical HDB flat was a little more than 3 times the annual salary of average factory work. Not too bad right?
Now lets fast-forward to 2017, the price of a 3-room HDB flat in Queenstown was listed as around $400,000 (God bless Google). While the average income of a Singaporean comes to about $2500 a month or $30,000 a year (According to Singstat’s key household income trends, 2016 report). That means that the Price-to-Income ratio of a HDB in 2017 is now 13 times the annual salary of the average Singaporean!
Indeed, in the last 33 years since 1980, the salary of the average Singaporean has gone up roughly 5 times ($500 to $2500) while a 3 room flat in Queenstown has risen 20 times ($20,000 to $400,000)!
You don’t need to be a mathematician to see the relationship that we Singaporeans have inherently grasped since our nation’s independence. The return on capital (your HDB) has far outweighed returns on labor.
So what do you do?
- Save
- Marry (hopefully the right one)
- Buy your own house and put your capital to work.
But is this cultural mindset still applicable today? Stay tuned for when we explore the changes in today’s market and if that age old question is still applicable – To buy or rent, are HDB prices still affordable?
Commentary like this is useful for understanding the broader market. The harder part is applying those ideas to a specific property, budget or decision you’re actually considering.
That’s often where a second opinion becomes valuable.
If you’d like to discuss how this applies to your own circumstances, you can reach out for a one-to-one consultation here.
And if you simply have a question or want to share a thought, feel free to write to us at stories@stackedhomes.com. We read every message.
Frequently asked questions
Why do many Singaporeans choose to live with their parents until they buy a home?
How have HDB prices in Singapore changed since the 1980s?
What is the current price-to-income ratio for a 3-room HDB flat in Singapore?
How does the increase in HDB prices compare to the rise in average salaries over the years?
Is buying a HDB flat still considered an affordable option for Singaporeans today?
1 Comments
yes db prices are soaring but that doesnt mean you cant secure a good hdb grant with a cheaper reno alternative. Go on a slim budget is the key!