In Singapore, it’s not about whether you can afford a home — but whether you can afford a freehold home.
At least, that’s the dream. Or my dream. How attainable is it really, though?
You might know the cheat: get a BTO, and hopefully sell it after five years to the tune of a tidy profit.
If you’re determined to be purchase a freehold condo in Singapore’s (admittedly saturated) property market, this guide might steer you in the right direction.
Freehold Condos In Singapore
You may know by now that Singapore’s property market is split into three regions:
- Core Central Region (CCR)
- Rest of Central Region (RCR)
- Outside Central Region (OCR)
Properties that sit within the CCR are particularly pricey, given these cover Districts 1, 2, 6, 9, 10 and 11 – plus Sentosa and the Downtown Core.
They’re also typically located closer to the MRT and Singapore’s best schools (perfect for kiasu to-be parents!).
How Much Does A Freehold Condo Cost?
Before getting into how much you’ll actually need to be able to afford it, here’s a quick look at freehold condo property prices around Singapore.
|Name of Property||Area||Price PSF||Price
(as at Sep 2019)
|Bukit 828||Upper Bukit Timah||S$1,453 to S$1,990||S$795,000 to S$2.14 million|
|The Midas||Balestier/Geylang||S$1,015 to S$1,087||S$888,000 to S$1.18 million|
|8M Residences||East Coast||S$1,737 to S$2,275||S$1,190,000 to S$3.5 million|
|Casa Cambio||Serangoon/Thomson||S$1,900 to S$3,400||S$650,000 to S$1.80 million|
|The Petals||Dairy Farm/Bukit Panjang||S$735 to S$1,515||S$1.26 million to S$1.65 million|
How Much Do I Need To Afford One?
Let’s assume you’re an employed 30-year-old with no pending loans.
You also live with your parents, and so have minimal bills, apart from the following:
|Pocket money (for parents)||S$500|
|Everyday expenses (food, entertainment, subscriptions)||S$1,000|
You’d like to pay off your freehold condo over 30 years – which is the maximum period allowed to enjoy the full 75% Loan-to-value (LTV) limit.
In the following breakdown, I’ve based my numbers off the assumption that you’re looking to get a two-bedroom condo in the CCR district; specifically, Suites at Bukit Timah.
In order to afford this condo, this is what you’ll need:
Condo location: Bukit Timah (CCR)
Condo cost: Around S$1.2 million
(5% of total cost)
|Cash or CPF:||$240,000
(20% of total cost)
|Bank Loan||Total Cost:||$900,000
(75% of total cost) over 30 years
|Monthly Repayment:||Around $3,400* (assuming annual interest rates of 2.1% to 2.2%)|
|Maintenance fees||Monthly:||$300 to $1,000|
|Total Needed||Monthly Salary (after CPF):||$5,830|
|Monthly Salary (before CPF):||$7,288 (rounded up)|
Breakdown: $2,130 (expenses) + $3,400 (monthly repayment) + $300 (minimum monthly maintenance fee) = $5,830 (after CPF)
*Monthly repayment calculated using home loan calculators from OCBC and DBS. I then worked out the average monthly cost based on the provided figures.
S$7,288 a month?
Yep, it’s daunting stuff – considering the median monthly salary in Singapore stands at S$4,437 before CPF deductions.
This number is also built on the assumption that:
- You don’t funnel a portion of your salary into investments/loans (you really should!)
- You have sufficient savings to fund the 25% downpayment
- The interest for your bank loan remains at 2.1~2.2% (it’s greatly dependent on the bank’s fluctuating rates after the fifth year mark)
- The cost of your home insurance policy remains the same – which it won’t.
Insurance companies typically charge a higher premium if you upgrade from an HDB to a condo.
And let’s not forget inflation rates, which the Monetary Authority of Singapore (MAS) tracks by way of the Consumer Price Index, or CPI.
In 2018, Singapore’s CPI rose 0.4% year-on-year.
CPI factors in everything from education and housing to healthcare, so it’s safe to say your monthly expenditure will inevitably go up.
Other Factors To Consider
Do You Meet The Total Debt Servicing Ratio (TDSR)?
TDSR essentially enforces a limit on your debt repayments by pegging it to 60% of your monthly income.
Debt repayments include:
- Personal loans
- Car loans
- Outstanding home loans
So if your take-home is S$8,000 monthly (after the CPF deduction) but your loans come up to S$5,600 — that’d already be 70% of your monthly income.
It’s highly likely your application for a freehold condo would be rejected.
Alternatively, you could be asked to place a higher downpayment on your freehold condo.
Loans: Taking A Bank Home Loan
Goodbye, HDB loans and grants.
Unless you’re some kinda Lee Ka-shing, paying off your freehold condo will mean taking a bank loan — which you’ll only get if you’ve a good credit score.
On that, though, bank home loans can only cover 75% of the cost of your property.
That means you’d need to be able to comfortably cover the remaining 25%, further split into the following ratios:
- 5% upfront (in cash)
- 20% (cash or CPF)
Then come bank interest rates, which are really enough to put me off even considering a freehold property.
At present, interest rates for bank loans are around 2% to 2.5% annually.
Rates typically go up significantly after the fourth year, though, so be sure to give yourself leeway in case of revised interest rates from your bank.
If you’ve other property loans outstanding, then tough luck – because your bank will only loan you 50% of the cost of your freehold condo.
TL;DR: You’ll need a good credit score to get a bank loan.
Is Getting A Freehold Condo Really The Best Idea?
While the term ‘freehold’ means ‘estate in perpetuity’ in the most Platonic sense, it really doesn’t mean forever.
At least, not in Singapore.
It’s really dependent on the URA’s masterplans. If plans for an MRT line coincide with your property location, you’ll be reimbursed, at best.
These other factors may put your freehold property at risk, too:
- The possibility of en bloc sales
- Location: A leasehold condo in a superior location (e.g. near Newton MRT) would trump a freehold condo in, say, Boon Lay.
- Additional Buyers Stamp Duty (ABSD): If you’ve purchased your freehold condo but haven’t sold your existing home, you may need to pay ABSD. In some cases, you could apply to have this waived.
When it comes down to it, owning a freehold condo sounds pretty darn cool on paper – and grants you bragging rights, to boot.
But if status is all you’re chasing, then you might want to reconsider investing in one.