One way to waste a handsome salary: Buying a home you can barely afford and ending up starved of cash for other goals. Which is why, it pays to be mindful when working out your finances to ensure affordability in the long run when it comes to picking the right property to buy.
To make life easier for aspiring home owners, we’ve done the math to provide the approximate salary that you should be earning in order to afford private property in locations within the prime districts, the city fringes, and suburban areas.
These estimates are primarily based on your ability to service your mortgage payments. We start with looking at the Total Debt Servicing Ratio (TDSR) framework, which dictates that the total loans you need to service in a month should not exceed 60% of your total gross monthly income. This includes all types of loans, including property, car loans, personal loans and even student loans.
We also take into consideration that regulations have capped the maximum loan tenure for private properties at 35 years. However, for loan tenure longer than 30 years, the maximum loan amount could be reduced to 60% of property purchase price.
For the purpose of this article, we will go with the following assumptions:
- Buyer is a Singapore citizen buying property for the first time.
- The buyer pays a 20% down payment, and takes up a 30-year home loan.
- TDSR framework of up to 60% of gross total monthly income.
- The buyer does not have any other loans to service.
Here’s how much an individual buyer will need to be earning in order to purchase a median priced two-bedroom condo in the core central region (CCR), rest of central region (RCR) and outside central region (OCR). For simplicity’s sake, we assume that all two-bedder units we compare are of 900 sq ft.
Loan size assuming borrowing 80%
Monthly gross income needed to satisfy 60% TDSR requirement
Annual gross income needed to satisfy 60% TDSR requirement
We also did a comparison of how much an individual would need to be earning on a minimum in order to purchase a new or a resale two-bedroom property in the CCR, RCR and OCR, as shown below:
1) Prime district properties
Lovers of luxury high-end property will likely find their dream home in Singapore’s prime districts or CCR, which covers areas like Bukit Timah, Holland Road, Novena, Orchard and River Valley. In 2017, sales of new properties within the CCR transacted at an average of $2,176 psf, while resale properties sold at an average of $1,893 psf.
Below are some examples of newly launched and resale condos in CCR and how much they could potentially cost:
New sale: Martin Modern
The 450-unit leasehold project is located in River Valley and comprises a range of two-to-four bedroom units from 764 sq ft to 1,798 sq ft. It is expected to receive its temporary occupation permit (TOP) by end 2021. Two-bedroom units with a floor size of 764 sq ft are currently listed for sale on Edgeprop.sg for between $1.6 million ($2,094.20 psf) and $1.8 million ($2,356.02 psf).
Using the above listings as guide, here’s how much you need to be earning to purchase a unit here:
Price: $1.6 million ($2,094.20 psf) for a 764 sq ft two-bedder with two bathrooms.
Estimated mortgage per month: $4,604
Minimum gross income per month: *$9,580
Find out more about Martin Modern here.
Resale: Parc Sophia
The 152-unit freehold development was completed in 2011 and is located roughly 300m away from Dhoby Ghaut MRT station. Currently, two-bedroom units with a floor size of 732 sq ft are being listed for sale on Edgeprop.sg for between $1.35 million ($1,844.30 psf) and $1.4 million ($1,912.60 psf).
To own a two-bedroom unit here, you need to be earning at least:
Price: $1.35 million ($1,844.30 psf) for a 732 sq ft two-bedder with one bathroom
Estimated mortgage per month: $3,832
Minimum gross income per month: *$8,083
2) City fringe properties
City fringe properties refer to projects in RCR, which covers areas such as Geylang, Kallang, Serangoon, Toa Payoh and Tiong Bahru. In 2017, new private properties in the RCR sold at an average of $1,656 psf, while resale condos sold at $1,240 psf.
The following are some examples of newly launched and resale condos in RCR and how much they could potentially cost:
New sale: Alex Residences
The 429-unit leasehold development on Alexandra View was completed in 2017 and is located just 266m away from Redhill MRT station. Currently, 657 sq ft two-bedder units at the development are listed for sale on Edgeprop.sg for between $1.15 million ($1,750.40 psf) and $1.18 million ($1,796 psf), slightly above the current average psf price of RCR properties.
To own a two-bedder unit at Alex Residences, you should be making at least:
Price: $1.15 million (1,750.40 psf) for a 657 sq ft two-bedder with two bathrooms
Estimated mortgage per month: $3,309
Minimum gross income per month: *$6,886
Find out more about Alex Residences here.
Resale: Beacon Heights
Completed in 2012, this 999-year leasehold project on Mar Thoma Road comprises 212 units. Two-bedroom units with a floor size of 667 sq ft at the development are currently listed for sale on Edgeprop.sg for between $830,000 ($1,244.40 psf) and $890,000 ($1,334.30 psf).
Here’s the minimum amount that you need to be earning every month in order to buy a unit here:
Price: 830,000 ($ 1,244.40 psf) for a 667 sq ft two-bedder with one bathroom
Estimated mortgage per month: $2,388
Minimum you need to be earning per month: *$4,970
3) Suburb properties
Commonly referred to as the suburbs of Singapore, properties located within OCR includes densely populated estates like Sengkang, Punggol, Tampines, Bedok and Jurong – where a variety of mass market condos are situated. In 2017, new private properties in the OCR sold at an average of 1,314 psf, while resale condos sold at 929 psf.
Below are some examples of newly launched and resale condos in OCR and how much you might need to fork out to own them:
New sale: Stars of Kovan
This 395-unit leasehold property located at Upper Serangoon is expected to receive its TOP in late 2020. Currently, 732 sq ft two-bedroom units with two bathrooms at Stars of Kovan are listed for sale on Edgeprop.sg at between $1.05 million ($ 1,382 psf) and close to $2 million ($ 1,633 psf).
Here’s the minimum amount you need to be earning to own a condo here:
Price: $1.05 million ($ 1,382 psf) for a 732 sq ft two-bedder with two bathrooms
Estimated mortgage per month: $3,024
Minimum you need to be earning per month: *$6,287
Find out more about Stars of Kovan here.
Resale: The Minton
The Minton was completed in 2013 and comprises 1,145 units. Two-bedroom units with a floor size of 980 sq ft are currently listed for sale on Edgeprop.sg from $920,700 ($939.50 psf) and $990,000 ($1,010.20 psf).
Here’s how much you need to be earning to buy a resale unit here:
Price: $920,700 ($939.50 psf) for a 980 sq ft two-bedder with two bathrooms
Estimated mortgage per month: $2,649
Minimum you need to be earning per month: *$5,513
*Figures provided are mere estimates and should not be used for official purposes.
There are further financial considerations to buying a home beyond just your mortgage and your down payment. They include upfront payments such as option fee, stamp duty on purchase and legal cost that buyers have to pay. You can read more about it here.
You can also use our affordability calculator to determine your mortgage or home loan affordability.
Keen to buy new property in the coming months? You can look up on new launches across the island here. Also check out our Edge Fair Value tool to find undervalued property, so you get the most value purchases for your money!
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