Wednesday, June 29, 2011

How Much To Get Married (Part 2) - HDB Flat

A few days back, I wrote about the cost of getting married in Singapore. In that post, I gave a brief outline on the items that a typical Chinese couple in Singapore would spend on. One of the big ticket items I identified was one's housing.

For most couples who have just started working and are probably not earning a lot (or born with a silver spoon), they will most probably opt to buy a HDB flat. This is perhaps the cheapest option unless you are willing to rent or stay with parents/in-laws.

When to rent

Some couples might opt to rent a flat or a room instead of buying their own HDB flat. This is usually due to cost considerations or because one is able to get a flat of choice. Others might simply want to be debt free and so choose to rent instead of buy. As a guide, one's mortgage loans (plus other debt payments) should not exceed 35% of the couple's combined salary. Most couples who have been working for 1-2 years should be below the $8000 combined income ceiling and should be eligible for a HDB flat.

In my personal opinion, it does not make sense to rent a HDB flat for long term since the HDB owner will most probably rent it out at a rate much higher than his or her own monthly mortgage payments. For e.g. if my monthly mortgage payment for my HDB flat is $1000, I will definitely rent it out at above $1000. This is common sense and so renting a flat is most probably a short term plan for most couples since it will be more cost efficient to pay the lower mortgage payments compared to the more expensive rent.

Buy A Flat

Buying a HDB flat is most probably cheap if you have money in your CPF. If both couples have been working and have build up sufficient amounts in their CPF-OA, they most probably will have enough to pay the deposit for the flat. Occasionally, some might have to top up the amounts with cash as they might not have sufficient amount of money in their CPF-OA.

In other instances, when buying a resale flat, the owner might ask for cash over valuation. Understand that this ranges quite a bit depending on flat type and location. But as a guide, I don't think that one should be overspending in this area. For me, $20K will be the maximum cash over valuation that I will be willing to pay now. This is because the HDB has just announced that it will be building a huge supply of flats. This flats will be ready probably in 2012 onwards. Based on that, one can expect the prices to come down a bit so if you can afford to wait, do wait. But for me personally, $20K is the maximum cash over valuation that I will be willing to pay.

What do the rest think? Is $20K a reasonable sum to budget for cash over valuation? Or is it too much/little?


  1. I don't know why you think that if you have money in your cpf, buying a hdb flat is cheap. I suspect you don't treat cpf as your own money, so your mental accounting automatically offsets the amount that you paid by cpf. Cpf is your own money afterall, so buying a hdb is as expensive or as cheap with or without the use of cpf.

    It's more affordable using cpf though, because the cash outlay is lesser, since you're going to have to pay cpf regardless of whether you have a flat or not. I think that's what you meant.

    Anyway, I paid 40k for my cov for a 5 room resale flat in a matured estate which I had bought last year. The mortgage amount is more than 30% of my pay, but I'm going to work towards increase my pay after getting the flat. I guess my job allows me to control the income so I play this game offensively rather. For employees whose pay is not controlled by themselves, they would have to play defensively.
    To me, this is a business cost so my home is both a place for me to work as well as a place to stay. It's very very worth it to get an ideal location, paying that 40k.

    Thus to answer your question, whether it's too high or low depends on how many rooms you're looking for and how much you place on getting that flat. 20k cov is more towards 4rm.

  2. Hi FF,
    Every one values tangibles or intangibles according to his "needs". Though every thing has it's price, i am more than willing to pay more because it meets my "needs".

  3. Hi FF
    How much should u pay for your COV depends on location and the number of years of lease remaining. If the resale flat already 30 years old, do be careful. BY the time u want to sell in the next UP cycle, it may be difficult to sell a property with less than 50-60 years lease for good value.

  4. Hi,

    The cov is dependent on market sentiments despite the prices we have in mind. The inefficiency in price levels is not helping at all too.

    so i think cov $20k may not enough.


  5. LOL...what is retarded?

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