Here’s How Much You Need To Buy A Condo In Singapore (2022)

One of the most common assumptions that many people have about private condominiums in Singapore is that only the rich and well-to-do people can afford them. While it is true that private condos do cost more than HDB flats, the reality is that they might be more affordable than you think.

In this article, we will analyse how much an average condo in Singapore costs, and work our way backwards to calculate just how much you need to earn to live in one without overstretching your finances. The main key component to plan for as well would be your safety net.

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How Much Do You Need When Buying A Condo in Singapore

First of all, here are some basic things you need to know about financing and paying for a condo in Singapore.

Financing Your Condo

By now, you should know that you can only finance a private condo in Singapore through a bank loan. That means you can’t use apply for HDB loans or any housing grants from the government to do so.

Once you’ve paid the minimum downpayment of 25% (at least 5% in cash and 20% in CPF), you are now allowed to borrow up to 75% of the property value for your home loan.

Total Debt Servicing Ratio (TDSR)

Getting a bank loan for a condo is really straightforward, usually, the banks will only look at your credit rating and Total Debt Servicing Ratio (TDSR), or in other words, how much of your income goes to repaying debts each month.

As long as your TDSR is not more than 55% of your monthly gross income, and you can afford the minimum downpayment of 25% (at least 5% in cash and 20% in CPF), the rest of the requirements can be pretty straightforward for you.

Since there is no limit to how much of your TDSR you can devote for your mortgage instalment, you can use the full 55% of your income for monthly payments to apply for a shorter loan tenure and less interest costs. However, this also means that you’ll not be able to borrow any more money for another purpose such as a car loan until the mortgage is fully paid.

And if you already use 40% of your TDSR on other debts, you will only be able to pay for a maximum monthly instalment equivalent to 15% of your income, with a corresponding loan tenure.

Fewer Restrictions on Purchasing Eligibility, Income Cap and Property Ownership

Unlike HDB, anyone can buy a condo in Singapore, including foreigners. Also, it is easier to purchase one because there is no income ceiling (unlike executive condos and HDB flats). Additionally, there are no restrictions on ownership of multiple properties as well, so that means you can be an existing owner of an HDB flat and still buy a private condo (although you’ll have to pay the hefty ABSD cost).

Now that we have a general idea of our eligibility and what to expect when buying a condo, let’s analyse their prices and calculate how much we need to earn to afford one.

So, how much does a private condo cost?

The prices of condos in Singapore can vary widely, depending on factors like size, location, and more. So in this article, we’ll use only 3-bedroom units as an example since they are a good size for young couples and families with children.

At the time of writing this, you can find very affordable three-bedders at around $900K to $1.5M in the Outside Central Region (OCR). For example, a 3-bedroom unit at Watergardens in Canberra starts at only $1.4M!

As we get closer to the city, the prices increase. In the city fringe (Rest of Central Region, or RCR), a 3-bedroom condo unit cost around $1.5M to $3M. Take the popular Normanton Park which was launched in January 2021—the 3-bedders start at around $1.8M.

Of course, the city (Core Central Region, or CCR) is where most of the premium projects are located. While it’s true that you may be able to find small 3-bedroom units that are slightly under $2.5 million, most of them actually cost way more!

How Much Do You Need to Earn to Afford a Private Condo Unit?

Purchasing a home is one of the biggest and most expensive decisions you can make in your life. You must pursue it with clear objectives right from the beginning.

When it comes to any property purchase what you should never do is to overstretch the budget. What you should do is work backwards, and get an indicative loan assessment done to understand what is the maximum loan you can take for the property purchase.

Since you can only take a bank loan and—at maximum, assuming no other debts—dedicate 55% of your monthly gross income to mortgage repayments, there are two things you need to think about:

• The minimum downpayment of 25% (of which at least 5% must be in cash)
• The long-term and recurring monthly mortgage repayments

These are the steps you need to work backwards to your desired income:

1. Calculate the Downpayment and Loan Quantum

First, you need to decide how much you want to loan and ‘split’ the condo’s price accordingly. For instance, if you are eligible to take the maximum 75% loan, then work out the sums for your 25% downpayment and the 75% loan quantum.

2. Calculate the Monthly Mortgage Repayments

Based on your preferred or maximum eligible loan tenure, loan amount, and interest rate, start calculating how much you would need to pay every month to fully repay the loan. For convenience, there are a lot of property portals offering you a mortgage calculator tool like PropertyGuru to assist you in this matter.

Let’s assume you are looking at 25 years of tenure and an interest rate of 1.6% p.a.

The above table is an illustration on your monthly mortgage payment amount based on a 1.6% interest and for a loan tenure of 25 years.

Your monthly mortgage payment will vary according to your age and the length of your loan tenure and it’s also subjected to the change in interest rate as set by the banks/ bank loan packages.

Example – With a loan of $750,000 over a period of 20 years and at an interest rate of 2.5%, your monthly mortgage repayments will be $3,975 per month.

3. Calculate Your TDSR

Next, you need to decide how much of your monthly gross income you intend to spend on paying the monthly instalments. This will decide your TDSR ‘limit’ and you can then calculate the ‘full’ income you need to earn to afford it.

Legally, you can use up to 55% of your income on both you and your spouse’s monthly mortgage (assuming you have no other debts), however, if you want a buffer and don’t want to ‘spend’ your entire TDSR ‘limit’ on the home loan, you can reduce it accordingly.

Also, do take note that the banks will compute your Total debt servicing ratio based on a 3.5% interest rate even if current mortgage borrowing rates are lower. This part of the TDSR measure to ensure borrowers will not be over leveraged when purchasing their home.

From the above table, you can see that in order to take a loan of $750,000, your gross monthly income must be at least $6,828 per month and you must have no other debt obligation such as (car loan, personal loan and other forms of credit facility)

Here’s another example, David is age 45 years old and is employed with a gross monthly income of $10,000 and is looking to purchase his first private property. He has no existing property but he has an existing car loan of $2,000 with DBS. The breakdown of his Total Debt Servicing Ratio will be as such

55% TDSR: $10,00 x 55% = $5,500
Max allowable mortgage payment under TDSR: $5,500 – $2,000 (car loan) = $3,500
Maximum loan David can take: $603,490 for a tenure of 20 years

With the above you can see that there are many components when computing your TDSR. if you are unclear, please do get in touch with a banker or us to have a free accurate assessment done.

Median Salary in Singapore: How Many of Us Can Afford Condos in Singapore?

According to the Manpower Research and Statistics Department of Singapore, the median gross monthly income (including CPF contributions) of full-time employed residents in 2021 is $4,680.

Based on this figure and the table above, it would seem that many Singaporeans can actually afford a condo in the Rest of Central Region (RCR) and Outside Central Region (OCR). But as homeowners and investors ourselves, we know that it is not the monthly salary and mortgage repayments that are the problem here – it’s the upfront downpayment.

That said, to ensure you do not over leverage we also encourage all our readers and clients to have a safety net mapped out to ensure they have ample reserve funds even after purchasing a property. This will help in keeping risks low as well. A illustration of how to map out your safety net as follows:

Safety net computation:

A safety net is in place to ensure you do not leverage and monthly instalments must be comfortable.

Once you determine the budget you can afford, you have to ensure that you have sufficient funds for your downpayment which is made up of cash & CPF monies.

Next is to work out your monthly instalment based on the property purchase price.

Example: Ample reserve funds left AFTER your property purchase
CASH: $200K
CPF: $50K
TOTAL RESERVE FUNDS YOU WILL HAVE IS: $250K

Worst-case scenario: In the event that you are not working & your spouse are not working

Monthly Instalment for the property is $3500, your 250K reserve funds can last you for 71 months.

This is also to ensure you have holding power & even when the going gets tough, your finances are sound.

Conclusion: Are You Planning to Buy a Private Condo?

Since you have saved up enough for the downpayment and planning to use it to buy a condo soon, do take note that you still need to do your homework to avoid making losses when you sell it in future.

Click here for a FREE calculation and plan for your property purchase