Owning a house in Singapore is expensive. While the government has done a pretty good job at making the monthly cash outlay for owning your home seem manageable, the TRUE cost of owning a 4-Room flat in Singapore is actually quite significant.
For those who are planning to buy your first home, there are a few factors that will affect the true cost of buying your 4-room flat. Let’s have a look at what these are.
Four factors that will determine the true cost of your 4-room flat
1. Mature Estates vs Non-Mature Estates
It is an open secret that mature estates will cost much more than non-mature estates because of the wide arrays of amenities available within mature estates.
You can experience this for yourself by just taking a walk down mature estates like Toa Payoh, Clementi and Tampines. You will find that amenities like childcare, supermarkets, shopping malls, hawker centres and mass rapid transits (MRTs) are just a stone’s throw away.
Contrast this to the non-mature estate like Punggol, Yew Tee and Bukit Batok. Some non-mature estates are still new like Punggol. Hence, it is a known fact that there are limited amenities at the moment. However, as the government continues to develop these areas, the concentration of amenities in these “younger” non-mature estates could grow in the future, unlike some of the “older” non-mature estates like Yew Tee.
Another reason for the difference in price between mature and non-mature estates is the potential for capital gains upon sale. The Housing & Development Board (HDB) publishes the median resale flat prices every quarter of each of the estates in Singapore that has public housing.
The difference between the average median price of resale flat in Toa Payoh and Yishun is S$196,000 (S$565,000 vs S$369,000). It would be unfair to homeowners in non-mature estates if they were to pay the same price for a 4-room flat as homeowners of mature estates.
- Hence, a 4-room flat in mature estates could be at least 16 percent (before grant) and at least 50 percent (after grant) more expensive compared to non-mature estates.
2. Build-To-Order vs Resale Flat
Another major factor that will affect the cost of your 4-room flat will be your decision to choose between a Build-To-Order (BTO) flat or resale flat. There is a huge difference in price between a BTO and resale flat because of the waiting time.
Resale flats have already been built and have met the minimum occupation period of five years. This means that you can move in with your loved ones without waiting for your flat to be built, unlike BTOs.
The general timeline for BTO flats nowadays is 3-4 years, depending on the location. Ministry of National Development stated that they are looking to reduce the waiting time to as little as three years through the use of modular building blocks.
- While resale flats do not have any waiting time, a resale flat would have at least five years shaved off its housing lease with HDB. This means that your home will have a shorter lease than a BTO flat (99 years – no. of years the owners have stayed).
- Not to forget, there could be a cash-over-valuation that you will have to pay if the selling price is above market valuation.
- A 4-Room resale flat is about 50 percent more expensive than a 4-Room BTO flat, not including cash-over-valuation.
3. Housing Grants
For first time homeowners, there is an array of housing grants available, be it for BTOs or resale flats.
For first time buyers (i.e. if you BTO), there are two types of CPF housing grants available: Additional CPF Housing Grant (AHG) and Special CPF Housing Grant (SHG).
- AHG is applicable for couples whose combined income does not exceed the income ceiling of S$5,000. The grant amount varies for every S$500 in monthly income.
- On the other hand, SHG is only applicable if first-time buyers are applying for homes in non-mature estates. This allows homeowners to offset up to S$40,000 from your housing cost.
- The income ceiling for SHG is S$8,500, which is higher than the income ceiling for AHG.
For those who are interested in buying resale flats, first-time owners can apply for three different grants: Enhanced CPF Housing Grant, Additional CPF Housing Grant and Proximity Housing Grant.
Resale Flat Grants
The AHG is similar for both BTOs and resale flats, which is subjected to the same income ceiling.
For Enhanced CPF Housing Grant, couples can receive S$50,000 for 4-room flats as long as your monthly income in the last 12 months is within the S$12,0000 income ceiling.
The last grant, which is elusive to those who apply for BTOs, is the Proximity Housing Grant. Families who choose to buy a resale flat near your parents (within 2km) can enjoy another S$20,000 off your resale flat price.
- While the grants defray the cost of your first home, homeowners have to note that these grants have to be repaid if you decide to sell your first flat.
- Buying a 4-Room resale flat can entitle you to receive S$60,000 – S$110,000 in grants to offset your flat cost.
- Buying a 4-Room BTO flat can entitle you to receive S$5,000 – S$80,000 in grants to offset your flat cost.
4. Hidden Factor: Interest Rate On Your Loan
While the housing price is fixed at the point of sale, there is still a variable factor affecting housing prices that slips most people’s minds – interest rate..
For homeowners who decide to take a housing loan from HDB, you will need to pay a concessionary interest rate of 0.10 percent above the prevailing CPF Ordinary Account (OA) interest rate. This concessionary interest is currently 2.60 percent.
Assuming a repayment period of 20 years, you would have to pay S$449,280 for a BTO flat valued S$350,000 including the interest rate. S$449,280 is the TRUE cost of getting a BTO flat after adding all the grants that you will receive.
For homeowners who are taking a loan from the banks, the total repayment amount could be higher or lower than taking a CPF housing loan, depending on interest rate fluctuations.