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Public Residential Property

Housing and Development Board (HDB) formed in 1960 manages Public Housing in Singapore. About 80% of Singaporeans live in houses that are publicly governed and developed by HDB. HDB flats were built primarily to provide affordable housing for the masses and their purchase can be financially-aided by the Central Provident Fund (CPF).

These flats are located in housing estates, which are self-contained satellite towns with schools, supermarkets, clinics, hawker centres, as well as sports and recreational facilities. There are a large variety of flat types and layouts, catering to a variety of housing budgets.

A three-room flat has two bedrooms and a living room in about 59 m2 (600 sq. ft.) of floor area. Each unit in an HDB block usually share a common corridor which may run across the length of slab blocks. Each of these units cost about $10,000 in 1970. As of Jan 2012, 700,000 residents (about 15% of population) lived in three-room or smaller HDB flats.

Historical: Median Combined Household Income > Cost of New 3 Room Flat (99 years lease) ~ Housing cost x of annual salary

1960: $120 > $5,000 ~ 3.5x
1970: $240 > $10,000 ~ 3.5x
1980: $1,000 > $50,000 ~ 4.1x
1990: $2,000 > $120,000 ~ 5.0x
2000: $3,500 > $110,000 ~ 2.6x
2010: $4,500 > $190,000 (600 sq. ft.) ~ 3.5x
2012: $4,950 > $220,000 ~ 4x

In the 1960s and 1970s, a family of 4 are happy to live in a 3 Room HDB Flats. Today, most are only happy if they are in a 4 Room HDB Flats with about 900 sq. ft. which will cost around $300,000.

2010: $4,500 > $300,000 (900 sq. ft.) ~ 5.5x

Getting A Housing Loan and Paying Off

The average price of new 3 Room HDB BTO (Build-To-Order) Flat is about $200,000. Therefore, the 5% down payment required is $10,000. For those who earn about $5,000, the HDB Housing grant is only $5,000. So still need to cash top-up of $5,000.

Since the CPF Ordinary Account (OA) contribution rate is 23 per cent (age below 35), the monthly OA is about $1,000 from a monthly income of $4,500.

Bank loan can give a max loan of only 80% ($160,000). 15% ($30,000) cpf and 5% ($10,000) must be cash. OA starts to decline from age 35 to 21 per cent, and gradually to 11.5 and 1 per cent after 55. Which meant that the cash component will go up.

According to HDB website, the interest rate was set at 2.6% per year. For 15 years loan, the total interest to be paid is $33,393.97. Also, there are stamp duty, conveyancing fee, etc... approximately $6,000 (2% to 3%). The total cost of the new flat is $240,000.

15 Years Mortgage for $160,000 = $$1,100/month (or CPF $1,000 + Cash $100).

Clearly, new HDB BTO Flat is still affordable.

But for HDB resale and Private Housing is could be in an un-affordability price range.

For Second Hand HDB in the resale market, the similar size home (remaining lease, say 88 years) could cost about $300,000 (1.5 times HDB BTO 600 sq. ft.) in 2010.

2010 Resale HDB: $4,500 > $300,000 (600 sq. ft.) ~ 5.5x

For Private Housing, the similar size home (99 years lease) could cost about $600,000 (3 times HDB BTO) in 2010.

2010 Private Homes: $4,500 > $600,000 (600 sq. ft.) ~ 11x
2010 Private Homes: $4,500 > $900,000 (900 sq. ft.) ~ 16.6x

Financial Planning Rule Of Thumb: The purchase price of a home should be less than 5 years (5x) of the combined family annual income.

This article was written in Dec 2010. As of writing, the cost home prices are still trending upwards and supplies are limited.

Mar 2011 Update: Minister Mentor Lee Kuan Yew strives to make home ownership the most valuable possession for Singaporeans. He said "We intend to keep the values of these homes up. It will never go down!" The MP for Tanjong Pagar said that home renewal and refurbishing programmes in Singapore ensure that the value of housing here will continue rising.

Note: Value is NOT Price. Correct choice of words.

Data Source: HDB. The index is based on average resale price by date of registration.

3 Room Resale HDB Flats (2011Q4)
Jurong West Estate S$300,000
Woodlands Estate S$302,500
Yishun Estate S$312,000
Geylang Estate S$313,000
Bukit Batok Estate S$320,000
Jurong East Estate S$325,000
Bedok Estate S$331,500
Hougang Estate S$331,500
Serangoon Estate S$340,000
Ang Mo Kio Estate S$341,500
Kallang/Whampoa Estate S$345,000
Toa Payoh Estate S$348,000
Tampines Estate S$356,000
Clementi Estate S$361,300
Queenstown Estate S$370,000
Bukit Merah Estate S$376,500
Central Area S$426,500