Complete Property Market Updates of Singapore

April 29, 2008

Raise income ceiling on HDB flats over $500k

Filed under: Uncategorized — Propertymarketupdates @ 5:04 am

With regard to the recent sale of Design, Build and Sell Scheme (DBSS) HDB flats in Boon Keng, I propose the Housing Board set different income limits for flats valued at more than $500,000. This makes more sense in terms of financial planning and affordability issues.

There were 3,500 who balloted for 714 DBSS flats in Boon Keng, but only 460 were sold. My nephew was one of those and was allocated a flat but failed the $8,000 income requirement to buy a new HDB flat. At a price of $727,000, it would be unwise for someone with a combined income of less than $8,000 to commit to a flat.

Simple calculation:-
Cost of flat: $727,000
Stamp and legal fees: +$18,100
Current CPF: -$100,000
Loan: $645,100 @ 2.5% over 30 years = $2,583 per month
Combined income of $8,000, CPF-OA contribution: -$1,840 per month
Cash top-up: $743 per month

Based on these figures, a couple would have over-committed to a 30-year housing loan. In the event that one of them is unable to work or needs to take care of children, the burden of the loan will be too heavy for the other party. They would not have surplus to save for retirement or other needs.

As a financial planner, my advice is that one should not commit more than 20 per cent of monthly income to a housing loan, and the full loan amount must be insured by both parties. A couple earning $8,000 combined should not commit to a new HDB flat valued at more than $500,000

Thus, I hope the HDB will set a higher income ceiling for flats over $500,000.

Song Yee Soon

Source : Straits Times – 16 Apr 2008


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