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Can Average Singaporeans Actually Afford To Buy Landed Houses?

MoneySmart logo MoneySmart 25/4/2019 Eugenia Liew
a house with trees in the background: landed property in singapore terrace house © Provided by MoneySmart Singapore Pte Ltd landed property in singapore terrace house

The other day, one of our colleagues randomly lamented about how it's as good as impossible for Singaporeans to afford landed properties in Singapore anymore ("the only way is to inherit it!"). He may be one of the most jaded, cynical people I know, but his comment was very sobering... And it got me thinking.

When I was in school, I used to think that by age 30, I would be married, have 2 kids and live in a big landed house. Basically, I envisioned myself living the Singaporean Dream, something our meritocratic society taught me to think was very possible as long as I worked really, really hard. As I fast approach the big 3-0, I realise that it's pretty much impossible - unless the heavens will I strike 4D, that dream is dead in the ditch for me.  

Can regular Singaporeans actually afford landed property in Singapore?

But assuming you earn an above-average income and start saving early enough... Is it actually possible for you to afford a landed home by age 35?

Let's work out the maths for an average Singaporean. We'll call him Joe.

  • He is 35 years old,
  • earns $7,500 monthly ($15,000 combined with his wife)
  • and owes $1,000 in monthly car loan repayments.

Because of the total debt servicing ratio (TDSR), Joe can only take a loan of 60% of his combined income with his wife. That's $9,000 per month, but the TDSR must include his car loan, so he has $8,000 left monthly.

Based on a reducing balance interest, the maximum loan he can take is about $1,781,560, and the purchase price of his new home must be $2.375m or less.  

Affordable landed houses in Singapore under $2.4mil

Typically, the fancy homes that come to mind when we think "landed house" cost upwards of $3.5m. For some context, they're at least 1,800 sqft in area, and when built up, can be as spacious as 3,000+ to 4,000+ sqft. Those are definitely out of our budget.

Nonetheless, with this hypothetical $2.4m, I went shopping on 99.co. I mostly looked at terrace houses, because they're the cheapest of the lot.

Disclaimer: This article is not sponsored or in any way affiliated with 99.co.  

1. Chuan Villas - leasehold terrace in Lorong Chuan for $2m

This terrace house at Chua Close is a pretty good deal - judging from the photos, the house looks ready to move in, so Joe probably won't have to spend much on renovations. The location is reasonably convenient - just 5 minutes away from Lorong Chuan MRT.

Price: $2,000,000 

Monthly mortgage: $5,772, based on 75% loan, 2.3% interest, 30-year tenure

Money left after mortgage, car loan repayments, and CPF contribution*: $5,228 monthly

However, the reason why this house is so cheap is because there's only 81 years left on the lease. It's definitely not something you would leave for your kids, but some would say it's a viable option for 10 to 15 years of living. After all, most people move several times in their life.

Although within our budget, $2m is still quite a stretch - after paying off the monthly loan repayments, Joe and his wife would only have $5,228 left for the household. If got children then jialat lor.  

2. Affinity at Serangoon - "landed" townhouse in Serangoon North for $2.25m

There are actual landed houses, and then there are those that provide what we like to call the "landed living" experience - introducing the townhouse.

Townhouses are built like landed homes, except they're located within a condominium. That means your neighbours will be a mix of apartment dwellers and other pseudo-landed homeowners. You will also have to pay a maintenance fee but will have access to all the facilities like the pool, squash courts and etc.

Affinity at Serangoon offers this, and a brand new townhouse costs $2.25mil. That's a pretty good deal considering the convenient location and spacious area (2,067 sqft built up).  


Price: $2,250,000

Monthly mortgage: $6,494, based on 75% loan, 2.3% interest, 30-year tenure

Money left after mortgage, car loan repayments, and CPF contribution*: $4,506 monthly

The catch is that it is leasehold (99 years) and like all condos, Joe will not actually own the land title, only the strata title.

The mortgage commitment is quite ridiculous though. Joe and his wife would have to live on $2,253 monthly each. To put things in perspective, that's about $75 per day.  

3. Sennett Estate Terrace - old but freehold landed house in MacPherson for $2.3m

Most would think it's impossible to score freehold property with such a tight budget - and they're mostly right. I managed to find this old terrace at Sennett Estate going for $2.3mil, which is right about the maximum Joe and his wife can supposedly afford.

Price: $2,300,000 

Monthly mortgage: $6,638, based on 75% loan, 2.3% interest, 30-year tenure

Money left after mortgage, car loan repayments, and CPF contribution*: $4,362 monthly

This plot is smaller than average (1,500 sqft) and the house is only 2 storeys tall, so even if you look at the built-up area (1,700 sqft), it's considered small for a landed house.

You may be asking: Since it is freehold, can't Joe just "tahan" the relatively poor conditions for a few years and save up to renovate?

Well, although the photos look halfway decent, the listed condition states that it is "land only / for rebuilding", which suggests it's not really in a liveable state.

If Joe were to carry out Additions and Alterations (A&A) - minor works that do not increase the total area by more than 50% - he will need to spend an additional $200,000 to $300,000. If he were to tear it down and rebuild it, it would cost double to triple that, which he stamp-plus-chop cannot afford.  

Conclusion - it's not impossible, but it is really hard

When I started "shopping", I sorted the homes by price (lowest first). The first few to come up were all under $1mil, with some costing as cheap as $300,000. Don't be fooled - these are very old homes with only a few years lease left.

They're not as cheap as they seem because you won't be able to get any help financing it, and will need to cough up the full price upfront.

But even for the other seemingly more affordable houses, there's still a lot to consider.

1. You may not be able to afford the downpayment.

The loan-to-value (LTV) ratio allows you to borrow up to 75%, which means you need to pay a 25% down payment. For a $2,350,000 house, that is $587,500.

You will need to fork out at least 5% in cash ($117,500) and can use your CPF to pay the 20% balance ($470,000).

$100k+ seems like an achievable savings target to hit by age 35, but the issue arises when you don't have $400k+ in CPF... Like Joe.

Assuming Joe and his wife have earned above $6,000 since age 25, they would have only about $331,200+ in their CPF by age 35. If they were to buy the landed house, they would need to be ready to come up with $256,300 in cold, hard cash.

2. After the monthly mortgage, you may not have enough money for well, anything else.

Let's say they do just that: Joe and his wife empty out their cash and CPF savings for the house. What are they left with?

Chances are, nothing. They'd need to start saving again. However, the problem is that even after paying the expensive down payment, they will still have to pay expensive mortgage repayments every month, which makes saving close to impossible.

If you refer to the properties above, their mortgage repayments are estimated to be around $5,700+ to $6,600+, which leaves them only about $4,400 to $5,300 to spend each month after mortgage, car loan repayments, and CPF contribution.

If they were planning to start a family (or already have kids), it will be very difficult to make ends meet. Aside from regular expenses like utility bills, groceries and whatnot, the cost of maintaining a landed home is much higher than other housing types. Also, it is pretty risky to living from hand to mouth - what if (knock on wood) you fall ill and need to pay for hefty medical expenses?

3. You need to pay higher maintenance costs for landed homes.

There are no conservancy fees for landed homes (excluding town- and cluster houses, of course), but upkeep will still cost you an arm and leg.

From getting a fresh coat of paint on the walls to sorting out the plumbing, anything you might want to repair or renovate will cost more. And it's not just for area-related stuff like the flooring.

My family moved from a HDB to a condo when I was in school, and I remember my mum's shock when she got the air-con servicing quotation for our new house. It was from our regular air-con man, but we were told that prices are higher because we're expected to pay a premium simply because "now private mah".

Also, houses are generally more "exposed" to the elements, so structures like the roof and etc wear out more quickly too.  

... So in conclusion, I guess our wise colleague was quite right. Man, I wish I had a landed home to inherit. 

* Disposable income is calculated after deducting the 20% CPF contribution, assumed $1,000 car loan, and estimated mortgage. Although assumed otherwise in Joe's case study, you are allowed to use your CPF to pay for the mortgage.

The post Can Average Singaporeans Actually Afford To Buy Landed Houses? appeared first on the MoneySmart blog.

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