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Single in the city: Can I still afford a home?

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Let’s face it; there is a growing number of singles in Singapore. Though the government is more family-orientated, it is heartening to know that over the years, the government has made amendments to its housing regulation for singles, not only allowing them to purchase resale flats of any size, but also new, subsidised two-room flats.

Having said that, can an average working single really afford such a huge investment single-handedly?

Example 1:

Type of housing: HDB BTO flat
Area: Bukit Batok (West Edge @ Bukit Batok & West Rock @ Bukit Batok)
Selling price: S$80,000 for a 2-room flat (S$95,000 if you are applying under SSC) ; low floor unit

In July 2013, the government introduced the Single Singapore Citizen (SSC) scheme, allowing first-timer singles aged 35 and above and earning up to S$5,000 a month, to purchase 2-room flats in non-mature estates directly from HDB. Before this scheme was introduced, singles could only purchase either private properties or resale HDB flats. Hence, this new move is indeed a piece of great news for singles, especially those with lower incomes.

However, before you singles out there get all excited, this does come with a catch. Eligible singles who apply for the 2-room flats under the SSC scheme will have to pay $15,000 more than married couples. Nonetheless, when the singles decide to marry later, they will be “reimbursed” with the CPF Housing Top-Up Grant of S$15,000.

Now, consider a single that just turned 35 years old, and draws an average monthly salary of S$2,500. He or she will be entitled to the Special CPF Housing Grant for singles where he or she will receive S$10,000 in CPF grants. Do note that SHG (Singles) is only given to eligible first-timer citizen who are applying a 2-room flat in non-mature estates (residential areas that are considered less than 20 years old), and whose average gross monthly household income does not exceed S$3,250.

In addition, singles who have an average income of S$2,500 and below, can further apply for Additional CPF Housing Grant (AHG). Using back the same example, beside the S$10,000 CPF grants, the single will also be entitled to S$2,500 AHG, bringing the total grant amount to S$12,500.

If he or she started working at 22 years old, by the time the single turns 35, he or she would have worked for 13 years. To keep things simple, we will be using an average monthly salary of S$ 2,500 as calculation (where S$ 575 is being allocated to the CPF Ordinary Account every month), which means the single will have at least S$ 89,700 in his or her CPF Ordinary Account after working for 13 years, excluding 13th month bonus and all other bonuses.

The purchase price for a BTO 2-room flat in Bukit Batok is S$95,000 (including the additional S$15,000), but the single will only need to pay S$82,500 after deducting his or her grants. As this amount is clearly less than his or her CPF savings, the single don’t even need to apply for any bank or HDB loan. In other words, the 2-room flat can be fully paid off using CPF.

Therefore, it is obvious that with this new scheme, singles can now well afford to purchase a home of their own without the need to fork out any cash upfront.

Example 2:

Type of housing: Resale HDB flat
Area: Ang Mo Kio Ave 1
Selling price: S$ 280,000 for a 3-room flat; low floor unit Lease commence date: 1978

Resale housing is also an option for singles that prefer larger homes and/or mature estates.

There’s no income ceiling for singles who want to purchase a HDB flat from the resale market. However, there is a maximum income limit of S$5,000 for singles who want to apply for a CPF Housing Grant or HDB loan.

Using the single example mentioned earlier, he or she will be entitled to a CPF Single Grant of S$15,000 and an AHG of S$2,500, totaling it to S$17,500. Hence, for a 3-room resale flat in Ang Mo Kio that comes with an S$280,000 asking price, the single will need to pay S$262,500 after deducting the grants.

Assuming the valuation price is higher than the sales price, and the single has decided to go ahead with the purchase using HDB loan, a cash deposit (not exceeding $5,000 in total including an option fee of between S$ 1 -S$ 1,000) will have to be made to the seller.

Let’s say the cash deposit is S$5,000, and as this forms part of the 10% downpayment required, this amount is now reduced to S$23,000 after deducting the cash deposit which can be paid by CPF.

Remember the single have at least S$ 89,700 in his or her CPF Ordinary Account, therefore, after using all the remaining savings in his or her CPF Ordinary Accounts to finance the downpayment and loan, the balance amount will be around S$ 167,800.

Using the HDB loan calculator and assuming a 25 years payback period, the single’s monthly loan installment is estimated to be $762. Since the monthly savings in his or her CPF Ordinary Account is only S$575 based on an average monthly salary of S$2,500, the single will have to top up an additional cash amount of S$187 every month. Another single with an average monthly salary of S$3,000, will be able to repay the loan completely with his or her CPF savings.

Hence, for singles who earn less than S$3,000 a month, HDB BTO flats will be a better choice as they do not need to fork out additional cash, and still can enjoy higher tax breaks and government subsidies (i.e. GST Voucher in the forms of Utility-Save).

Nonetheless, singles with lower incomes can also consider applying resale flats or Executive Condominiums (eligible for those with an average combined monthly income less than S$12,000) under the Joint Singles Scheme. Under this scheme, two to four single citizens can jointly buy an HDB flat from the open market, where the income ceiling and grant amount double.

As the saying goes, there is strength in numbers, and when more people join forces to co-own a house, the burden is shared and the dream of becoming a home-owner is more easily achieved.

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Written by PropertyGuru.com.sg


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