How Much Do You Need to Earn to Buy a Condo?
Many people in Singapore view owning a condo as an essential part of achieving the "Singaporean dream." However, the thought of how much you need to earn to buy one may seem intimidating. While condos used to be priced at two to three times that of HDB flats, HDB resale flat prices have risen during the COVID-19 pandemic and are at an all-time high. Similarly, private property prices have steadily increased, making it seem impossible for many to afford a condo. Although it is true that you will need an above-average salary to purchase a condo in Singapore, the actual amount may be closer to your current salary than you realize. In this article, we will explore some of the more affordable condos in Singapore and explain how to finance them. We will use high mortgage rates to compare case studies of prospective condo buyers across income brackets to realistically illustrate how much you need to earn to buy a condo in Singapore.
How Much Does It Cost to Buy a Condo in Singapore?
The cost of buying a condo in Singapore varies depending on the location and size of the unit. This guide will focus on 3-bedroom condo units as they are a popular choice for young couples, families, and HDB upgraders. In the Outside Central Region (OCR), the most affordable 3-bedroom units are priced between $900,000 to $1.5 million, with older and leasehold units being the most affordable. For instance, as of March 21, 2023, a 3-bedroom unit at The Woodgrove is priced between $880,000 to $1 million. Newer condos like The Commodore also have 3-bedroom units starting at $1 million.
In the Rest of Central Region (RCR), a 3-bedroom condo can cost from $1.5 million to $3 million. Units around Aljunied, Paya Lebar, and Geylang are considered more affordable. Meanwhile, condos in the city fringe, which are closer to the Central Business District (CBD), can go from upwards of $2 million. The Core Central Region (CCR) is where most of Singapore's luxury condos are located, with smaller 3-bedroom units going for slightly below $3 million, while most of them costing way more.
Area in Singapore Average cost of 3-bedroom condo units in Singapore
Outside Central Region (OCR) $1 million to $1.5 million
Rest of Central Region (RCR) $1.5 million to $3 million
Core Central Region (CCR) $2.5 million and up
Financing and Grants: Total Debt Servicing Ratio (TDSR) Applies
When financing the purchase of a condo through a bank loan, you will need to meet certain criteria including your credit score and your Total Debt Servicing Ratio (TDSR). This ratio is the maximum amount of your monthly gross income that can be used to pay off debt, and it should not exceed 55%. To complete the purchase of a condo in Singapore, you will need to have enough savings or cash on hand to make the minimum condo down payment of 25%, of which at least 5% must be paid in cash and the remaining 20% can be paid using your CPF or cash.
While there is no limit to the percentage of your TDSR that you can allocate to your condo mortgage, using up to 55% of your monthly gross income for mortgage repayments can result in a shorter loan tenure and lower overall interest costs. However, this means that you won't be able to borrow more money to finance other big purchases, such as a car, until your mortgage is fully repaid. If you already use 40% of your TDSR on other debts and credit, your maximum monthly installment can only be up to 15% of your monthly gross income, with a corresponding loan tenure.
Fewer Restrictions on Purchasing Eligibility, Income Cap, and Property Ownership
Compared to purchasing HDB flats, buying condos in Singapore may be considered less restrictive in terms of eligibility criteria, income cap, and property ownership. One advantage is that anyone, including foreigners, can purchase condos in Singapore, while HDB properties are limited to Singapore citizens and permanent residents. Additionally, condo buyers are not subject to an income ceiling, which is a requirement for HDB flats and new executive condominiums. Moreover, condo buyers are not limited in their ownership of other properties, meaning they can still own an HDB flat while owning a condo, but this would result in Additional Buyer's Stamp Duty (ABSD) being imposed.
How Much Do You Need to Earn to Buy a Condo?
However, when determining personal affordability, it's not enough to just meet the eligibility criteria and consider debt servicing limits. One should also factor in their cash flow situation, which includes their income and expenses. The maximum amount of one's monthly gross income that can be used to pay off a mortgage is 55%, according to the Total Debt Servicing Ratio (TDSR) rule. To determine the required income to buy a condo in Singapore, one must consider both the upfront minimum down payment of 25% (with at least 5% in cash) and the recurring monthly mortgage payments.
Work Out the Downpayment and Loan Quantum
Condo price Breakdown
$1,000,000 $250,000 condo down payment, $750,000 loan
$1,500,000 $375,000 condo down paymen t, $1,125,000 loan
$2,000,000 $500,000 condo down payment, $1,500,000 loan
Calculate the Monthly Mortgage Repayments
let’s say you are looking at 25 years of tenure and an interest rate of 3.75% p.a
Condo price Monthly mortgage repayments (3.75% p.a., 25 years)
$1,000,000 (i.e. $750,000 bank loan) $3,856 per month
$1,500,000 (i.e. $1,125,000 bank loan) $5,784 per month
$2,000,000 (i.e. $1,500,000 bank loan) $7,712 per month
It is important to note that the current high interest rate environment is temporary and subject to change as market conditions fluctuate. Therefore, even if you are taking out a bank loan with higher interest rates, you can always consider refinancing your home loan at a later stage.
Work Out Your TDSR
Determine the portion of your monthly income that you plan to allocate for mortgage payments, which will establish your desired TDSR threshold. From there, you can calculate your necessary total income (100%) to cover the expenses. In terms of the minimum income required, it is possible to dedicate up to 55% of your earnings to the mortgage payment (assuming there are no other outstanding debts). If you desire a safety margin and do not want to exhaust your entire TDSR allocation on the home loan, you can choose to lower your threshold.
Condo price Minimum income needed (based on 55% TDSR)
$1,000,000
(i.e. $750,000 bank loan, $3,856 per month at 3.75% p.a. for 25 years) $7,011 per month
$1,500,000
(i.e. $1,125,000 bank loan, $5,784 per month at 3.75 % p.a. for 25 years) $10,516 per month
$2,000,000
(i.e. $1,500,000 bank loan, $7,712 per month at 3.75% p.a. for 25 years) $14,022 per month
Median Salary in Singapore: How Many of Us Can Afford Condos in Singapore?
The Manpower Research and Statistics Department of Singapore has reported that the median gross monthly income from work (including employer CPF contributions) of full-time employed residents in 2022 is $5,070. Given this information and the table presented earlier, it appears that purchasing an entry-level condo in the OCR and RCR is within reach for many Singaporeans. This is particularly true if we assume that the minimum income is that of a couple who jointly borrows to finance their home, rather than an individual's income. However, for most people, the challenge of purchasing a condo is not the monthly salary or mortgage repayments but rather the substantial down payment required. Although it may be difficult to purchase a private condo as a first home, saving up for a few years can make it more feasible.
