Private home prices have increased 15.9% in URA flash estimates. Moreover many are still jumping on this bandwagon. I'm all for prices to rise but a better situation would be a gradual rise rather than what is happening at the moment.
http://www.straitstimes.com/Breaking%2BNews/Singapore/Story/STIStory_437137.html
At this rate how can I afford to buy my dream home?
Also, HDB's calculation on what is deemed as "affordable" seems to be skewed. To use a 30 year tenure seems to discount the fact that most Singaporeans are making their housing purchases when they are in their late 20s. What's the difference you may ask?
Let's assume a household income of $5,000 per month
HDB's calculation (30 year loan tenure)
30% of $5,000 to be spent on housing installments. $1,500
Based on a 30 year loan at 2.6% interest, this works out to be a loan amount of $375,000. (90% of valuation amount)
My recommended calculation (20 year loan tenure)
30% of $5,000 to be spent on housing installments. $1,500
Based on a 20 year loan at 2.6% interest, this works out to be a loan amount of $280,000. (90% of valuation amount)
In HDB's calculation, this household can afford a flat worth about $416,000. In my calculation this same household can only afford a flat worth $310,000.
My advice to everyone out there: Please work out your sums properly. You are making purchases on the assumption that you will stay employed and healthy for the next 30 years. Also, all calculations are made on the basis of maximum leverage.
Alternatively I could be seriously mistaken and that Singaporeans are much wealthier than I thought.
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1 comment:
Actually Singaporeans are generally crazy. They spend like as though they are all loaded. By locking us with a home loan, we cannot leave this rat race anymore. We have to work our lives for the house.
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