Due to the success of Singapore’s public housing policy, which began in the 1960s, 80% of the Singapore’s populace live in HDB flats today. Private housing are mainly for higher income earners. Those considering buying a residential property in this island nation have to take into account a variety of factors, we will take a closer look at each in turn in this article.
Reason for purchase
First and foremost, buying a property for investment or owner-occupation makes a difference.
Naturally, if it is for investment, the chief factor in consideration will be the capital gain. On the other hand, buying for owner-occupation makes capital gain a secondary concern. In this case, more important factors will be the current or future size of the household. A retiree or single may opt for a smaller flat. While a young, married couple may also choose a small flat if their financial means are limited, or a large flat if they are planning to have children and provided if they are rich enough to afford it.
Type of housing
The next consideration is the housing type. With the many types available, buyers are often spoil for choice. The below two tables compare the private and public housing segments.
Table 1: Available Housing Types in Singapore
1. HDB (99-year lease)
- Build-to-Order (BTO)
- Studio Apartment (30-year lease)
- 2-room Flat
- 3-room Flat
- 4-room Flat
- 5-room Flat
- Executive Condominium
- Design and Build (DBSS)
- Executive Flat (No longer built)
- Executive Maisonette (No longer built)
- HUDC (No longer built)
2. Private Housing (60-*, 99-, 999- year lease; freehold)
- Walk-up Apartment
- High-rise Apartment
- Condominium
- Shoebox Apartment
- Soho
- Strata Titled Cluster Housing
- Inter Terraces
- Semi Detaches
- Bungalows
- Landed Housing
- Inter terraces (Type 1 and 2)
- Corner terraces
- Semi Detaches
- Bungalows
- Good Class Bungalows
- Sentosa Landed Housing (the only landed properties in Singapore for which foreigners can buy with express approval)
* A land at Jalan Jurong Kechil is the first 60-year lease plot to be sold (on 15 November 2012); thus a 60-year private property will be available in a few years’ time.
** Executive Condominium becomes private after 10 years.
Table 2: Comparison of HDB and Private Housing
1. HDB
- Eligibility:
- Direct Purchase from HDB – Singaporeans Gross Monthly Household Income ≤ $10,000 (For Executive Condominium ≤ $12,000)
- Resale – Singaporeans and Permanent Residents
- 99-year Lease
- Most Affordable Type of Housing
- For Owner-occupation
- Lower Maintenance Cost (Conservancy Charges)
- Stringent Restriction for Leasing Out
- Minimum Occupation Period
2. Private Housing
- 60-, 99-, 999- year Lease; Freehold
- Tend to be More Expensive
- For Owner-occupation and Investment
- Higher Maintenance Cost (Property Taxes, Monthly Maintenance Charges, etc.)
- No Restriction for Leasing Out
- No Minimum Occupation Period
- Eligibility:
- Non-landed – Foreigners, Singaporeans and Permanent Residents
- Landed – Singaporeans
* A land at Jalan Jurong Kechil is the first 60-year lease plot to be sold (on 15 November 2012); thus a 60-year private property will be available in a few years’ time. I will recommend Sol Acres EC
To decide which housing type suit the buyer’s budget, a commonly used measure of housing affordability is the debt-to-service ratio (DSR), defined as
DSR = Monthly Debt Service / Monthly Gross Household Income
The internationally recognised benchmark for housing affordability is a DSR of 30 per cent. For example, based on a household with a monthly income of S$3,000 buying a S$300,000 3-room HDB flat, with no housing grants, the household can take a loan of up 80 per cent of the price (assuming that they have no outstanding mortgage loan), or S$240,000. Given an annual interest rate of 2 per cent, based on a 30-year loan, the monthly installment incurred will be about S$887. This works out to a DSR of roughly 30%, which still falls within the affordable range.
Another widely used affordability measure divides the price of a home by a potential buyer’s annual income.
Recommended : http://solacres-ec.sg/
