Expensive Home vs Longer Commute: Here's How to Decide! (With Nov 2020 BTO Launch Example)

If you have been losing sleep about having to choose between affordable housing or a convenient location, know that you are not alone.

This is a dilemma that most of us face.

Living in an ulu (remote/deserted) area will help you get more money in your savings account; provided you can tahan (tolerate) the longer travel time/commute.

But what should you choose? Here is a guide that will help you make the decision!

We will start with an illustrative example and compare the Pros and Cons of either approach.

Example: BTO Flat Sembawang vs Bishan

To illustrate this comparison, we will be using the information about the upcoming November 2020 BTO launch based on an estimation of how much a 4-room flat will cost in Sembawang and Bishan.

Disclaimer: For illustrative purposes only. This acts as a general comparison for potential homeowners to consider the financial perspective of buying an expensive home with a convenient location compared to a cheaper home with an inconvenient location.

Price Difference: Novebmer 2020 Sembawang BTO vs Bishan BTO

If you opt for a Sembawang BTO four-room flat (estimated cost ~$270,000 excluding grants), over the Bishan BTO four-room flat (estimated cost ~$500,000 excluding grants) — you will save a good $230,000!

Food for thought? Let’s keep this amount in mind.

Location

Aside from the price difference, the Sembawang area is inconvenient, considering it is about 30km or about a 30-minute drive from the central area.

Whereas for Bishan, it is about 14.6 km or about an 18 minutes drive from the central area.

Generally, the main thing difference for most Singaporeans would be the longer commute.

Since most of the time will be spent travelling to work, I will be using the Raffles Place Area as an example.

To compare the commute times, we will be calculating how long it will take to get to Raffles Place MRT by public transport for both BTO launch sites.

Sembawang November 2020 BTO to Raffles Place Travel Time

To get from the Sembawang HDB BTO in November 2020, you will take about 55 minutes via public transport.

Bishan November 2020 BTO to Raffles Place Travel Time

Whereas for the Bishan HDB BTO in November 2020, you will take just 35 minutes via public transport.

That’s a time savings of about 20 minutes each way which will amount to 40 minutes a day!

Pros of Expensive House With Convenient Location

Although you will be spending a lot more, here are the Pros of buying an expensive home in a convenient location like Bishan.

1. Save Time

First and foremost, the largest and most obvious advantage of a home in a convenient location is the amount of time you will be saving.

From the above-mentioned example, you will be able to cut 20 minutes off your daily commute each way, that’s 40 minutes a day, which saves you about 175 hours of your time every year (if you work five days per week).

That’s also seven and a half-days of constant travel each year!

Not to mention that even if you drive to work daily, a shorter commute will be cheaper overall as you will be using less petrol as well as reducing the wear and tear on your vehicle.

The time you are saving could be better used for things like spending more quality time with your friends and family, taking up a hobby, volunteering and more.

2. Better For Health and Wellbeing

There are numerous studies conducted about the effects of a long commute on your health and well being.

Mental Health

A 2017 study of 34,000 workers in the UK by Mercer found that people with longer commutes were 33 per cent more likely to have depression, while a good 12 per cent were more likely to report that they are suffering from work-related stress.

In addition, a study from the University School of Medicine in Saint Louis and the Cooper Institute found that individuals with commutes that were longer than 10 miles (16km) were more likely to have depression, and anxiety.

Physical Health

Also, longer commutes have been linked to several health problems like higher blood pressure, obesity, and sleep deprivation.

Overall, it is clear that longer commutes are bad for your physical and mental well being.

Cons of Expensive House With Convenient Location

Well, the biggest con you have to contend with is the higher price.

1. Expensive

For example, if you opt for a Bishan BTO four-room flat (estimated cost ~$500,000 excluding grants) over a Sembawang BTO four-room flat (estimated cost ~$270,000 excluding grants),  — you will have to spend $230,000 more!

This has an opportunity cost which we will discuss below.

Pros of Cheaper House With Inconvenient Location

1. Save Money

I would think that the main reason why people would live with longer commutes is that opens up more affordable housing options.

If you are willing to travel about 20 to 30 minutes more, you can find homes outside of the central area, which may cost almost half as much, as seen with the above example.

In Singapore, we are blessed with good public transport where you can watch your shows or listen to personal finance podcasts for a more bearable commute.

If you drive, the situation might be different.

A smooth relaxing drive can turn in something unbearable when there is rush hour traffic when people commute home from work.

2. Money Saved Can be Invested

Here’s something to think about.

One of the drawbacks of Singapore’s matured economy is that Singapore’s economic growth has slowed.

The reality is that young couples buying a flat today probably will not see such a huge appreciation because “our economy is maturing and it cannot grow as fast anymore”.

Not to mention the property cooling measures that the Singapore Government has implemented to slow property price growth.

There’s a strong argument to buy the most affordable house that meets your needs as the Government is looking to depress HDB prices for the next 10 to 40 years.

Also, another point to remember is that we only own our HDB flat for 99 years.

Which means that at some point in time, our property will depreciate in value. Or as some property experts call it, lease decay.

But if you take the path of buying the cheapest HDB flat for your needs, you will be left with a good chunk of cash or CPF to invest.

Take the example mentioned above.

Let’s say you were to take the $230,000 saved from buying a more affordable house in a less convenient location to invest.

You have decided to put away $1,000 monthly and dollar cost average into an investment vehicle that will deliver an achievable and modest rate of returns of 4 per cent per annum.

P.S. Check out our guide to investing if you want to find out more:

After 19 years and 2 months, this is how much you would have earned this much:

Quite a tidy sum don’t you think?

3. Less Liability in Case of Financial Hardship

Times are tough.

This year’s COVID-19 crisis has seen many losing their jobs in Singapore.

The last thing that you want is to be having to service a huge mortgage loan on top of other loans you might have taken up when you become unemployed.

Your mileage may vary, but it would be generally better for you to overstretch yourself by spending too much on property.

Cons of Cheaper House With Inconvenient Location

However, buying a cheaper house with an inconvenient location will increase your commuting time to everywhere.

1. You Will Lose Time

Sure you might be saving money on your house, but you will have to spend more time commuting.

Personally, I value a home with a convenient location more.

Just last year, I spent about one hour travelling to work. But after a change of jobs, my travelling time was cut by more than half.

This made me happier as I was able to reach home before the sun sets and have more time for family, friends and my hobbies.

Here’s some food for thought.

The VALUE of anything is the amount of life you pay for it. 

You will need to consider what is more important to you.

Sacrifices will have to be made either way.

Making Your Decision

To find out if a more expensive home or longer commute is better for you, you can compare housing costs between a home that is nearer to your work and a home that is further away.

You will have to factor in how much the commute will cost you in terms of time as well.

Although this guide is giving you the answer to the dilemma from a financial point of view, there are other things that you might want to consider.

For example, if you want to start a family and raise kids, the school that you are living near to is important.

You might also want to live in the more expensive neighbourhood as you might have grown up there or you like the neighbourhood better.

To decide you will have to consider both the financial aspect and the quality of life you want before making the decision.

All the best!

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