If you’ve been thinking about buying a flat in Singapore, you might have felt confused and overwhelmed about the fees and costs involved.
In this article, we get down to brass tacks. Here’s much you realistically need in the bank to buy your first house, and what other expenses to prepare for.
What are the Property Prices in Singapore for 2016?
The costs of properties can vary significantly, based on factors such as surrounding amenities and condition. There will always be the occasional neighbourhood or unit in which the price is much higher or lower than the norm. These are general estimates only:
Why Resale Flats are More Expensive
A resale flat costs more because home prices tend to appreciate over time. A resale flat also means there is no wait time (you may have to wait two to three years for a BTO flat to be finished). There may be more amenities built up around the flat, as it has been around longer.
For resale flats, there may be a premium on top of the actual flat price. This is called the Cash Over Valuation (COV). This varies significantly in different estates, from zero COV (no premium) to large amounts like S$50,000.
In extreme cases, there have been “million dollar flats” resulting from sky high COVs. The current record holder is a maisonette in Bishan, which sold for a COV of $250,000 in 2014.
On Condominiums and Executive Condominiums
The prices we listed above are for most mass-market condos. Prices will be significantly higher for condos close to the Orchard area, as those would be considered luxury properties.
As a general guideline, a new Executive Condominium (EC) is about 20 per cent cheaper than an equivalent new condo. This price difference falls to around nine per cent after the Minimum Occupancy Period (MOP) of five years, and narrows further to five per cent afterward.
In short, deduct 20 per cent off the equivalent condo price for a new EC, and nine per cent for an EC that is at the five to 10-year mark.
How Much Money Do You Need to Save for Your First Flat?
We can work this out in steps, using a four-room flat and a three-bedroom condo as our examples.
In addition to these costs, we suggest you build an emergency fund that can cover six months of your mortgage payments, if your CPF is not already sufficient for such a provision.
1. At Least 5% Downpayment
If you are using an HDB Concessionary Loan, you will need to make a downpayment of 10 per cent of the purchase price or valuation, whichever is higher. The downpayment can be paid from your CPF Ordinary Account (OA), in cash, or through a combination of both.
If you are using a bank loan, you will need to make a downpayment of 20 per cent of the purchase price or valuation, whichever is higher. At least five per cent of this downpayment must be in cash. Of the remaining 15 per cent, you can pay from your CPF OA, in cash, or a combination of both. Note that you must use a bank loan for ECs.
Note that this total downpayment is inclusive of the Option to Purchase (OTP). The OTP is a non-refundable deposit, that must be put down two weeks before the sale of the house. This deposit is counted as part of the downpayment, once you exercise the option.
In the case of a three-room BTO flat with a price of S$180,000, the downpayment is S$18,000. This can be from your CPF OA, in cash, or a combination of both.
In the case of a three-bedroom condo at a price of S$900,000, the downpayment is S$180,000. Of this S$180,000, at least S$45,000 must be paid in cash. The remaining S$135,000 can be paid through your CPF OA, or a combination of your CPF OA and cash. With some discipline and careful planning, you can save money for your flat’s down payment before you turn 35.
2. Conveyancing Fees
There are legal involved, in processing the paperwork for property ownership. For new HDB flats, the cost of legal fees is calculated as follows:
First $30,000 of property value: S$0.90 per S$1,000
Next $30,000 of property value: S$0.72 per S$1,000
Remaining Amount: $0.60 per S$1,000
There is no need to calculate this manually. Just enter the price of the flat in the HDB legal fee calculator.
In addition, there is a Caveat Registration Fee of S$64.45 that must be paid to the Singapore Land Authority.
For our sample three-room BTO, with a price of S$180,000, the fee would be $121. Inclusive of the Caveat Registration Fee, this would be S$181.45.
For bank loans, the conveyancing fees can range between S$1,100 to S$3,000. Note that this price varies between law firms, and you can request to use a cheaper law firm than the bank’s default choice. If you use a mortgage broker, they will usually try to find a cheaper law firm for you.
If you use HDB’s default law firm, the conveyancing fees can be paid from your CPF. If you are using another law firm (such as one chosen by the bank), you will have to ask the firm whether fees can be paid via CPF.
For our sample condo, we will assume conveyancing fees of about S$1,500.
3. Home Insurance Premiums
The basic fire insurance for HDB flats comes from Etiqa, and is not a significant cost (S$1.50 to S$7.50 for a five-year term). Basic fire insurance is mandatory. For our three-room flat, it is just S$4.50 for five years.
However, you should consider comprehensive home insurance. This gives you coverage for things such as temporary accommodation and storage costs (you will need both in the event of fire), and third party coverage (if the fire is your fault and your neighbour’s house burns down, they might be able to hold you liable for damages).
We strongly recommend that all homeowners get a comprehensive insurance policy. Although the risk is small, the financial damage that can ensure is devastating. Remember that you will also have to repair and refurnish the house, after any disasters.
The cost differs based on the insurer, but typical rates are between S$45 to over S$700 per annum (the most expensive policies may also include accident plans, which cover you and your family in the event of an accident).
Policies for private homes cost more as compared to flats. We will assume our sample three-room flat has an insurance cost of S$45 per annum, whereas our sample condo has an insurance cost of around S$200 per annum.
4. Renovation and Furnishing Costs
The maximum cap on most renovation loans is six months of your income, or S$30,000. We will also assume this is the general amount spent on furnishing your unit, whether you pay it all in cash or take a loan.
Interest rates on renovation loans range from three to five per cent per annum, so be sure to compare between banks before buying. The typical loan tenure is between three to five years.
5. Maintenance Fees
These are conservancy fees in HDB estates. You will have to check the rates with your town council, but they are generally in the range of S$20 to S$90 per month for Singapore citizens (reduced rates). Non-citizens pay a normal rate, which is notably higher (check with your town council for specific details).
We will assume our three-room flat has conservancy charges of S$45 per month.
For condos, maintenance fees depend on the management council. These typically range from S$200 to S$350, although there are cases when fees are even higher – for high-end developments with a concierge service or elaborate facilities, it is possible to see monthly costs of S$400 or more.
We will assume our sample condo has maintenance fees of S$250 per month.
6. Property Taxes
Property taxes are determined by your home’s Annual Value (AV). The AV is the annual amount that you would get from renting out your property (check with the Inland Revenue Authority of Singapore to determine your home’s AV).
You do not need to work out the amount manually. Just use this online calculator to determine your tax rate.
For our sample three-room flat, we will assume an AV of S$14,400. The tax payable would be around S$512 per annum.
For our sample condo, we will assume an AV of S$36,000. The tax payable is S$2,240 per annum.
7. Mortgage Repayments
For HDB flats, the mortgage interest rate is always 0.1 per cent above the prevailing CPF OA rate. This is currently 2.6 per cent per annum.
For private property, the mortgage rate fluctuates. However, it is has been around 1.8 per cent per annum since 2008.
We will assume a 25-year loan for both our sample properties. The loan for the three-room flat is S$162,000 (after down payment), and this comes to a repayment of $735 per month for 25 years.
The loan for the condo is S$882,000 (after down payment). Assuming the rate stays at around 1.8 per cent, this comes to a repayment of S$3,653 per month, over 25 years.
The initial cost of the three-room flat, taking into consideration all of the above, is around S$48,181 (including CPF funds used). The monthly cost you have to be prepared to pay is about S$827 per month, for 25 years.
The initial cost of the condo would be S$211,500 (including CPF funds used). The monthly cost is about S$4,057, for the next 25 years.
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