Downpayment for condo: How much do first-timers need in Singapore?

"Buying a house in Singapore is easy!" …said no one ever. The path to home ownership in Singapore is often a difficult, convoluted and arduous task. It's one that was made even harder with the advent of Covid-19, which repercussions on housing development delays we're still feeling today.

Chances are, you landed upon this article about buying a condo because you're trying to check out all your housing options before settling for one that suits your circumstances.

Here's all the information you need about that all-important condo downpayment in Singapore so you can decide on what to do next as a first-time home buyer.

1. Why would first-time home buyers splash out on a condo?

In the past, it was a standard rite of passage for Singaporean first-time home buyers to purchase an HDB BTO flat, then upgrade to a condo at some point.

Nowadays, that standard home ownership path is no longer the norm. Here are some reasons why.

Covid-19 delayed a bunch of BTO flats

Covid-19 complicated a lot of things. In the thick of the pandemic, BTO home owners-to-be received the sobering news that their HDB BTO flats would be delayed up to a year or more with the tighter Covid-19 restrictions.

Last we heard, the Covid-19 batch of BTO flats are set to be completed by early 2025. But that's still almost two years away. Not great news if you're looking to move out of your parents' place ASAP.

That's why some have decided to get an executive condominium (EC) instead of a BTO flat. Especially if you've been trying your luck at BTO-ing only to keep getting queue numbers that miss the mark.

Some of us don't qualify for a BTO flat

There are the restrictions around buying an HDB flat. For example, you need to be a citizen, form a nuclear family (or be over 35), and be earning within the income ceiling.

Some of us can't afford a resale flat either

HDB resale flat prices keep climbing. Have you seen some of the absurd seven-digit price tags recently?

In July 2023, a five-room resale flat in Toa Payoh broke the record for being the most expensive resale flat ever sold for its type — $1.42 million!

With BTO flats, you don't really get a choice

If you're offered the chance to book a BTO flat, even if the remaining units are the last thing you wanted, HDB will pressure you to book it.

From 2023, first-time applicants who are offered the chance to book a flat but choose not to will lose their BTO priority status. Yup, that refers to the additional first-time ballot chances that new-to-BTO couples have. Mind you, these couples can still fail >10 times to BTO-we've all heard the horror stories.

It's no wonder first-time home buyers like you might be considering buying a condo instead.

2. How much is the condo downpayment in Singapore for first-timers?

If you were wondering how much you need to have on hand to buy a condo-and be done with the circus that is public housing-this article is for you.

There are quite a few factors that affect your condo downpayment in Singapore:

• Loan-to-Value (LTV) Limit: the amount that you can borrow from the bank
• The outstanding condo downpayment, which you can use your CPF to pay partly
• The minimum cash downpayment, which must come from your bank account
• Stamp Duty (BSD and/or ABSD), which you must pay in cash first (then request a reimbursement from CPF)

These factors vary depending on the price of the condo. For simplicity's sake, let's assume you're looking for a small condo in a non-central neighbourhood, and you've found a unit going at $800,000. 

The table below breaks down the costs you need for your condo downpayment in Singapore:

3. How much do I need in cash + CPF for my condo downpayment?

In case you didn't know already, you can use your CPF funds to pay for your condo downpayment. So no, you don't need to cough up the full sum in cash. Phew!

If you're using CPF for your condo downpayment, the funds have to come from your Ordinary Account (OA).

In the above mentioned example, the up-and-coming condo costs $800,000. You have a total downpayment of $200,000, or 25 per cent of the condo's price-this hefty amount has been required by law since 2018. 

Of this $200,000, you'll need to pay at least $40,000 in cash, i.e. 5 per cent of purchase price.

The remaining amount can be borne from your CPF OA. This equates to $160,000, or 20 per cent of purchase price. 

But wait! Do you have $160,000 in your CPF account!? If you're a regular salaried worker earning a pretty high income of $4,000/month, it'll take a little over eight years for your OA to accrue that much. Ooft. That's a long time.

So if your CPF OA isn't quite as flush, you'll need to pay more than $40,000 in cash for your condo downpayment.

4. Do I need to pay stamp duty (BSD or ABSD) in cash?

Buyer's Stamp Duty (BSD) is an extra cost you need to factor in when saving up for your condo downpayment. It's applicable on all residential property purchases, regardless of whether you're a first-time buyer.

Here's a screenshot from IRAS to show you how it's calculated:

For an $800,000 condo unit, the Buyer's Stamp Duty is $18,600. If you're a Singapore citizen, that's "all" you have to pay.

But if you're a PR or foreigner, you'll need to factor in Additional Buyer's Stamp Duty. For your first property purchase, PRs need to pay a tax of five per cent while foreigners get taxed a whopping 60 per cent.

In total, PRs need to pay BSD + ABSD (five per cent) = $58,600 (calculator here), while foreigners need to cough up BSD + ABSD (60 per cent) = $498,600 (calculator here).

You can use CPF OA to pay Stamp Duty, but it's on a reimbursement basis. This means that you still have to fork out the funds from your bank account.

And obviously, your CPF needs to have enough balance to reimburse you in the first place.

5. How much are the monthly repayments for my condo with a home loan?

Thought coughing up the hefty downpayment was hard? Wait till you hear about the monthly repayments for your condo.

Right now, typical home loan bank rates hover around 3.7 per cent-5.5 per cent p.a., with a lock-in period of one to three years. Here's an idea of what your monthly repayments will look like from various banks with the current interest rates:

For a condo that costs $800,000, assuming you take a loan of $600,000, you're looking at a monthly repayment of at least $3,520 for 20 years. (For the fellow mathematically challenged folks out there wondering how this is calculated, it's not a simple matter of taking 3.75 per cent x $600,000. Compounding is confusing. Let a free online loan calculator do it for you.)

The above mentioned rates assume that you take up a fixed home loan, but there are many other types of home loans. For home loans from banks, you can choose a fixed interest rate or a floating one. Floating interest rates are pegged to the Singapore Overnight Rate Average (SORA), an interest rate benchmark that MAS calculates and that banks use to determine interest rates on their home loans.

The current SORA is 3.67 per cent as of Aug 2023. To see how a bank uses this, let's take Maybank as an example. Maybank charges an interest rate of 3M Compounded SORA + 0.70 per cent p.a. for the first three years.

That means you'll be paying 4.37 per cent p.a. for at least the first year, and can only hope the SORA decreases thereafter. Otherwise, you might be better off with their fixed rate home loan package, which fixes the interest at 3.75 per cent.

Do note that after the lock-in period, fixed home loan interest rates will revert to the floating rates.

Always keep up to date with the interest rates and do not hesitate to refinance your home loan if need be!

6. Do I have enough money for a condo downpayment?

To summarise, Singaporeans need at least $160,000 in CPF OA and $58,600 cash on hand for a condo downpayment. (If you do not have enough in your CPF OA, you'll need to pay more in cash.)

If you're weighing that against the other options, here are guides for you to mull over:

• HDB BTO flat
• HDB resale flat
• Executive condominium

Most home purchases follow a similar structure: work out your downpayment from the borrowing limit, then how much you have in your CPF vs cash you actually need to pay. Your circumstances may be unique, which is why we have property financing tools for you to work out what's best for you.

But if you've got your heart set on a condo unit, then you definitely need to work and save hard for that six-digit sum.

Consider low-risk investments to attain higher returns if you have years to save for your condo downpayment. Otherwise, your best bet would be side gigs and other income streams for extra cash in the short term.

ALSO READ: We make $324k per year: Should we sell our 28-year-old HDB flat to upgrade to a new launch or resale condo?

This article was first published in MoneySmart.