The maths of buying a flat
By Daryl Chin, The Straits Times, 3 Mar 2012
During Thursday's Budget debate, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam rebutted a claim by Workers' Party NCMP Gerald Giam that many younger Singaporeans from low-income households, who dream of buying a house for themselves and their parents, will find this difficult. Mr Tharman said that 98 per cent of Singaporeans below 35 earn at least $1,000 and are able to buy flats.
Said Mr Khaw: 'This piece of comment caused a stir precisely because it sounded so incredible.'
Mr Tharman was referring to a new two-room flat, he explained.
He pointed out that the subsidised price of new two-roomers was about $100,000, if the applicant is a first-timer. He will also be entitled to housing grants of up to $60,000.
'So the net selling price to him is about $40,000, and the monthly mortgage payment of such an HDB loan can be fully recovered from his Central Provident Fund contribution,' said Mr Khaw.
He added that most two-room applicants earn above that income ceiling, pointing out that their median income based on recent BTO launches stood at about $1,400.
Only in Singapore...
Tears were shed by some, who lamented about the ability to buy flats for their parents in the future. Others raised their eyebrows when DPM Tharman made the point about the $1,000 income family being able to afford to buy a small flat. Online critics went to town to mock the im-possibility of this.
Well...
For a first time applicant, he can apply for a new 2-room standard BTO (Build-to-Order) flat in a non-mature estate. These flats are set aside for those earning $2,000 and below a month.
These households earning $1,000 can qualify for generous housing grants.
Available to them are the Additional CPF Housing Grant (AHG) of up to $40,000, and the Special CPF Housing Grant (SHG) of up to $20,000.
These grants could be used for the flat down payment. Total = $60,000
How much is a flat? Using the selling price of a new 2-room BTO flat in Fernvale Lea in Sengkang as an example, it is $100,000 (offered in the Jan 12 BTO exercise; the price range was from $83,000 to $112,000)
How much is a flat? Using the selling price of a new 2-room BTO flat in Fernvale Lea in Sengkang as an example, it is $100,000 (offered in the Jan 12 BTO exercise; the price range was from $83,000 to $112,000)
Deduct the $60,000. The applicant needs to pay $40,000.
With a loan for $40,000, repayment per month is as shown below:
- 30 years loan : $161/mth
- 25 years loan : $182/mth
- 20 years loan : $214/mth
For a young household headed by an income earner with a salary of $1,000 per month. He will have a total of $217 contributed monthly to his CPF Ordinary Account.
Monthly cash outlay = $0
Monthly cash outlay = $0
This support for families enable them to move from rental to owning their own homes.
If they prefer to rent, rentals for those with income of about $1,000 is $90-123 for 1-room, $123-$165 for 2-room.
4300 of these 2-rm BTO flats have been built since 2006. More in pipeline this year. Situation is manageable.
Demand for rentals still remain high and we are increasing the building of rental flats. By 2012 we would have about 50,000 and waiting time would come down from 21 to 8 months.
This note will not be talking about the range of efforts undertaken for low income Singaporeans. It is meant to explain about one aspect of housing.
We have other initiatives to help, amongst which are transfers, job provision etc. Many of these are existing measures and new ones which this Budget 2012 addresses.
But I will just mention Workfare. If he's aged 35-44, together with Workfare Special Bonus, he'd get $1,313 per year. If aged 45-54, $1,750 per year.
Miscellaneous Info for those interested in some data:
- The Average Monthly Household Income from Work among Resident Employed Households for the 1st-10th percent is $1,581 for 2011.
- 1 to 2 roomers comprise 4.6% of distribution of resident households.
- In Govt transfers, they receive an average of $3,270 per household member.
- Across the board, average household size is 3.5 For 1-2 roomers, average household size was 2.2
An Inclusive Society...making it happen
Hdb Infoweb
Buying HDB flat on $1K pay possible, says Josephine Teo
By S Ramesh, Channel NewsAsia, 3 Mar 2012
By S Ramesh, Channel NewsAsia, 3 Mar 2012
As for Deputy Prime Minister Tharman Shanmugaratnam's comment that Singaporeans earning S$1,000 could also own a home, Minister of State Josephine Teo said she was not surprised at the mixed reactions from netizens.
"They don't necessarily know that there are grants available from the HDB that will make the actual size of the loan for purchasing these houses not very big.
"With the grants, the loan amount is about S$40,000 and if you stretch it out over 20 or 30 years, the monthly instalment is in the range of S$100 to S$200," she said.
"On the one hand, people can't imagine that even a person earning S$1,000 can earn a home. On the other hand, the facts do show that with grant support and with regular jobs and CPF contributions, over time that goal can be reached even for those on the lower end of our income spectrum.
"So that's a strength of our society and we should make an effort to reach out to these individuals so that they too know they can fulfill their dreams of owning (a home), it is not out of their reach," she said.
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