Buying an HDB resale flat in 2022: How much do you need to be earning?
PHOTO: Pexels
PUBLISHED ONApril 05, 2022 2:24 AMByJoel Koh
So…
You looked at the latest May 2022 Housing and Development Board (HDB) Build-to-order (BTO) Launch and scoffed at the long wait times of 2.5 to 5.5 years.
Or maybe you've applied countless times for a BTO flat or tried your luck with the sale of balance (SBF) exercises or open booking of flats scheme but still ended up with nothing.
That's tough. But there's an alternative. You could always get an HDB resale flat.
Granted, the HDB resale market wrapped up 2021 on a new high as prices increased by 12.7 per cent. Despite that, resale flats still remain relatively affordable with housing grants.
Before we get ahead of ourselves, let's do a little math to find out: What type of HDB flat can you REALLY afford ?
TL;DR: Buying a resale HDB flat - how much should you be earning?
| HDB Loan | |||||
|---|---|---|---|---|---|
| Type of HDB flat | Median resale price (Feb 2022) |
Downpayment (15% in CPF/Cash) |
Housing loan amount (85% of purchase price) |
Estimated monthly instalment (2.6% p.a.) |
Min. gross monthly household income (30% MSR) |
| Three-room | $350,000 | $52,500 | $297,500 | $1,350 | $4,500 |
| Four-room | $485,000 | $72,750 | $412,250 | $1,870 | $6,234 |
| Five-room | $608,000 | $91,200 | $516,800 | $2,345 | $7,816 |
| Executive | $777,000 | $116,550 | $660,450 | $2,996 | $9,987 |
| Bank loan | |||||
| Type of HDB flat | Median resale price (Feb 2022) |
Downpayment 25% (Min. 5% Cash + 20% CPF/Cash) |
Housing loan amount (75%) |
Estimated monthly instalment (1.5% p.a.) |
Min. gross monthly household income (30% MSR) |
| Three-room | $350,000 | $87,500 ($17,500 cash + $70,000 CPF/Cash) |
$262,500 | $1,050 | $3,500 |
| Four-room | $485,000 | $121,250 ($24,250 Cash + $97,000 CPF/Cash) |
$363,750 | $1,455 | $4,850 |
| Five-room | $608,000 | $152,000 ($30,400 cash + $121,600 CPF/Cash) |
$456,000 | $1,824 | $6,080 |
| Executive | $777,000 | $194,250 ($38,850 cash + $155,400 CPF/Cash) |
$582,750 | $2,331 | $7,770 |
HDB resale flat grants
Before we dive into how much you need to earn, let's look into how much in Central Provident Fund (CPF) housing grants you can get if you buy a resale flat from the open market.
FYI: According to HDB, homebuyers can use these housing grants to offset the purchase price of their flats and reduce the amount of mortgage loan required. The housing grants will be fully credited into their CPF accounts, and no cash will be disbursed.
The maximum amount of CPF housing grants you can get is $160,000, but the amount you can get is dependent using grants someone can get depends on factors like:
- Their marital status
- Their monthly household income
- Whether they are applying for a flat for the first time or second time
- Living near their parents or children.
- And more.
For example, eligible first-timer families may apply for the following:
- Family Grant: Maximum $50,000 in grants (in increments of $5,000) + monthly household income ceiling of $14,000
- Enhanced CPF Housing Grant: Maximum $80,000 + monthly household income ceiling of $9,000
- Proximity Grant: Maximum $30,000 for those buying a resale to live with their parents/child or within 4km of parents/child.
Also, Here's a neat little infographic from 99.co breaking it down further:
For a full breakdown of the amount of CPF housing grants, you can get check out our comprehensive HDB CPF Housing Grants guide:
Transacted HDB prices February 2022
To illustrate this, we will be using data from the latest 99.co-SRX February 2022 HDB Flats Resale Market flash report :
FYI: The median price is the fiftieth percentile amount of HDB resale flat purchases. This means that half of the flats transacted were purchased at amounts above the median price, and half were purchased at amounts below the median price.
These figures are based on resale flat transactions recorded for the month and sorted by town and flat type.
As a rough guide, we will be distilling it down to the overall median resale prices.
We would recommend that you use the calculators provided to estimate affordability.
HDB resale portal
If you are in the market for an HDB resale flat, you can use the HDB resale price index portal to find a fair price for a flat in the estate that you want to live in.
How much you need to earn each month to afford an HDB flat (CPF housing loan)
The estimates will be based on the following assumptions:
- You will apply for an HDB loan and can meet the criteria to borrow the maximum of 85 per cent of the purchase price. This means that you will only need to pay a 15 per cent downpayment
- You will be taking on the maximum HDB loan tenure of 25 years with the prevailing interest rate of 2.6 per cent per annum (p.a.), which is 0.1 per cent above the CPF Ordinary Account (OA) interest rate
- The loan tenure is the maximum of 25 years, with the current interest rate of 2.6 per cent
- This is your only mortgage
- When you take up an HDB home loan, there is a cap on the monthly instalment amount you can take up (i.e. 30 per cent mortgage servicing ratio [MSR]). Your monthly home loan instalment cannot exceed 30 per cent of your household's gross monthly income (income before deduction of employee CPF contributions)
- We used PropertyGuru's Mortgage Repayment Calculator to estimate the monthly mortgage payments you need to make. This figure is then used to derive the minimum monthly income required to buy a resale flat
- We will not consider HDB CPF housing grants in the calculations as it varies wildly from person to person.
| Type of HDB flat | Median resale price (Feb 2022) | Downpayment 15% in CPF/Cash |
Housing loan amount 85% of purchase price |
Estimated monthly instalment 2.6% p.a. |
Min. gross monthly household income 30% MSR |
|---|---|---|---|---|---|
| Three-room | $350,000 | $52,500 | $297,500 | $1,350 | $4,500 |
| Four-room | $485,000 | $72,750 | $412,250 | $1,870 | $6,234 |
| Five-room | $608,000 | $91,200 | $516,800 | $2,345 | $7,816 |
| Executive | $777,000 | $116,550 | $660,450 | $2,996 | $9,987 |
How much you need to earn each month to afford an HDB flat (bank housing loan)
The estimates will be based on the following assumptions:
- You're taking a bank loan for your HDB flat and can meet the criteria to borrow the maximum of 75 per cent of the purchase price. This means that you will have to pay a 25 per cent downpayment, of which five per cent has to be paid with cash while the remaining 20 per cent can be paid with CPF.
- You will be taking on a loan tenure of 25 years with the prevailing interest rate of 1.5 per cent p.a. based on the cheapest five-year DBS fixed loan package (via ValueChampion as of March 26, 2022):
-
PHOTO: Seedly
-
- This is your only mortgage
- When you take up an HDB bank home loan, there is a cap on the monthly instalment amount you can take up (i.e. 30 per cent MSR). Your monthly home loan instalment cannot exceed 30 per cent of your household's gross monthly income (income before deduction of employee CPF contributions)
- We used PropertyGuru's Mortgage Repayment Calculator to estimate the monthly mortgage payments you need to make. This figure is then used to derive the minimum monthly income required to buy a resale flat
- We will not consider HDB CPF housing grants in the calculations as it varies wildly from person to person.
| Type of HDB flat | Median resale price (Feb 2022) | Downpayment 25% (Min. 5% Cash + 20% CPF/Cash) |
Housing loan amount 75% | Estimated monthly instalment 1.5% p.a. |
Min. gross monthly household income 30% MSR |
|---|---|---|---|---|---|
| Three-room | $350,000 | $87,500 ($17,500 cash + $70,000 CPF/Cash) |
$262,500 | $1,050 | $3,500 |
| Four-room | $485,000 | $121,250 ($24,250 Cash + $97,000 CPF/Cash) |
$363,750 | $1,455 | $4,850 |
| Five-room | $608,000 | $152,000 ($30,400 cash + $121,600 CPF/Cash) |
$456,000 | $1,824 | $6,080 |
| Executive | $777,000 | $194,250 ($38,850 cash + $155,400 CPF/Cash) |
$582,750 | $2,331 | $7,770 |
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This article was first published in Seedly.