Before purchasing a private property or condo in Singapore, you have to make sure that you are not worried or stressed out when the time comes. The size of the bank loan for a condo can be terrifying but if managed well, making sure you have sufficient backup, then you will feel a lot more secured. So, is it worth buying a condo in Singapore?
Buying a condo in Singapore will be the same analogy as Seiko vs Rolex. About 81% of the population live in HDB. Rarity will cause the asset price to increase. Same for the property as well, if you have an HDB in Whampoa, it is proven that the seller sold over $1,000,000. Rolex will tend to appreciate in value compared to Seiko due to its exclusivity. Therefore, if you can afford comfortably, yes, you should go ahead to purchase a condo in Singapore.
Some considerations before purchasing
We need to consider some factors before purchasing a property. Just making sure that we hit these milestones before even considering to purchase private property.
- At least 6 months of salary in savings from each spouse
- Minimize your debts
- Saving enough for the down payment and other fees
- Able to cope with the rise in interest rates
- Daily expenditures
At least 6 months of your salary
We have calculated that monthly installments are about 30% of 1 spouse’s salary. Hence, if the property is under 2 names, both spouse contributing, having 6 months of salary will help to cushion our any difficult times. For example, $1,000,000 property will have about $750,000 loan. At 2% bank interest, the monthly installment is approximately $2,800. Let’s say per couple combined income is $16,000 , this will help to bring about a total of $96,000. That should be the amount we are looking at in terms of savings to cushion any crisis comfortably.
Minimizing your debts
Having debts is not the way to have a good retirement. However, in Singapore, there are no cheap properties. Eventually, most Singaporeans will be taking up a huge debt. Therefore, try to reduce your other existing loans as much as you can before taking a loan. It helps you as you are not so stressful and secondly, due to TDSR (total debt servicing ratio), the housing loan will be easier to be approved.
saving for down payment and other fees
Given the new measures, buyers now have to face LTV (loan to value ratio) when purchasing a property. In this case, buyers only can take up to a maximum of 75% of the property value for a housing loan. Therefore, buyers have to try to save 25% for the downpayment. On top of that, we have the BSD (buyer stamp duties) and ABSD (additional buy stamp duties) to pay. Upon transacting the property, we have to also pay for conveyancing fees and some other valuation fees. For first time buyers, try to save up to about 32% of the property value. This will help you purchase a property comfortable. This will help to set aside funds for renovation if needed as well.
Ability to cope with rise in interest rates
There are 2 types of bank loan, floating and fixed rates. Upon securing a bank loan, usually, the lock-in period will be between 1-3 years depending on the bank’s criteria. However, fixed rates are not perpetually fixed as the bank will still adjust the interest rates in accordance with the economy. Therefore, doing your homework well and refinancing your loan when needed will help you save those extra months of installment, and picking the right type of rates will help you pay down your loan principal during low-interest environments.
Secondly, doing proper financial calculations will help. On top of those monthly installments and house expenditures, are you still able to make savings? If yes, then you are good to purchase a condo.
This actually brings us to the next point, daily expenditures. Before deciding if a condo is worth buying, you have to make sure that you are able to make savings on top of all your expenses. This is important as it helps to save towards your second home or even upgrade your home. Even if you have no more plans of purchasing another property, it will help to save for a rainy day and for your retirement. In Singapore, things are never cheap and inflation is real. Therefore, always try to have savings for a rainy day! We will never know when the next GST hike, when will CPF payout be delayed or whether income tax will be raised.
conclusion – is it worth buying a condo
Buying a condo will be the same as buying a piece of rare jewelry. No doubt it is expensive but if you can afford it, I say go for it. This asset will be rare and appreciate. 81% of Singapore’s population lives in HDB and that means on left with 19% of the population living in private properties. So where to find the cheapest condo in Singapore?