Let’s face it, if we want to be prudent to the point of necessity, all we need to live is a cave, a fire, and a big club to whack our prey to death. But life is about aspirations; and sometimes, even if you can still qualify for a HDB flat, you want a condo anyway. Well for you big dreamers out there, we at ezbuy.sg have broken down the cost:
How much does a typical condo cost?
Condos in Singapore vary in price, based on which district their in. The priciest districts are 9, 10, and 11, which include Orchard Road, Tanglin, and Sentosa. These condos cost so much money ($6 million or above is not uncommon), we suspect CNB checks your car for smuggled heroin if you so much as step in the showroom.
Most Singaporeans though, when they talk about condos, are referring to mass market condos. These are condos in the Outside of Central Region (OCR), in places like Tampines or Clementi. For the purposes of this example, we will assume you’re looking at one of these more typical condos, which will cost around $1.2 million.
Here’s the breakdown of what you’ll pay:
1. The down payment
Assuming you have no outstanding home loans, you can get a maximum Loan to Value (LTV) ratio of 80 per cent from the bank. That is, the bank can lend you a maximum of 80 per cent of the property value.
(In case it needs to be said, you can’t take a HDB loan for your condo. Due to, you know, the fact that it’s not a HDB property?)
So for our $1.2 million condo, you would be able to borrow a grand total of $960,000. Now mind you, this assumes the bank agrees to give you the full 80 per cent; they are not required to do that.
This means there is a remaining payment of 20 per cent, or $240,000.
Another 15 per cent can be paid using your CPF Ordinary Account (CPF OA) funds ($180,000 in this case), and the remaining five per cent has to be paid in cold, hard cash ($60,000).
You may think that’s a lot, but most of the people who managed it have robbed fewer than three banks.
2. The monthly repayment
Okay, here’s where things get complicated. You see in Singapore, banks don’t have perpetual fixed rate loans. That means your mortgage (what you borrowed to buy the house) repayments can go up or down.
The typical mortgage interest rate, as I write this, is about 1.8 per cent per annum. I’m going to make it two per cent though, because that will be the most typical rate by the end of 2017. That’s Donald Trump’s fault*.
(*Not a joke. American interest rate hikes cause interest rates to rise in Singapore as well).
I’m going to assume you take a 25 year loan, at two per cent interest. This means, via a formula more complex than calculus and less complex than nasi padang prices, that you will pay around $4,069 per month.
Yes, I know that’s more than some people’s entire salary (median income in Singapore is around $4,000 a month). Now you know just how rich some of your fellow Singaporeans really are. Ask your boss for a raise.
If it makes you feel better though, you can use your CPF OA to make the monthly repayments.
Over a period of 25 years, you would have paid around $1,220,700, for a $960,000 loan. For the record, this is also one of the cheapest loans you will ever get in your life. We bet that really makes your day, huh.
Oh, and that’s not the end of the costs. You see there’s…
3. The monthly maintenance fee
You know how HDB estates have a conservancy charge? Well condos have maintenance fees too, except you may notice condos have fewer residents than an HDB estate. You know what means?
It means the cost of maintenance is shared between fewer people. So now you know why developers bother to list the total number of units. A condo with 400 units will probably have sky high maintenance charges, whereas a condo with 1,500 units will probably have much lower costs.
Also, the bigger the unit you own, the bigger your share of the maintenance fees.
For a typical mass market condo with 1,400 square feet, you can expect a maintenance fee of about $300 a month. That’s an approximation. Fancier condos can cost more, and luxury condos with concierge services can have maintenance fees in excess of $1,000 a month.
Oh wait, we’re not done yet. There’s still the price of…
Unless you sleep on the bare concrete, you’ll have to renovate.
This will cost at least $30,000. We know that because of highly accurate horoscope readings. Or maybe we know because the maximum renovation loan granted by banks is $30,000, or up to six months of your income (whichever is higher), and contractors plan around that. One of those two reasons is true.
Contractors will generally demand 20 per cent upfront, and 20 per cent as each stage of the renovation is completed.
If you see furnishings that you like, don’t buy it from a big designer store. Mark-ups for branding and marketing can be as high as 60 to 100 per cent.
Instead, check out ezbuy’s huge furniture selections, and see if you can find a more competitively priced version. And if you use ezbuy Prime, you can have anything shipped over for $2.99, no matter how absurdly bulky or heavy it is. Yes, even if it’s a 200 kilo bed. Only three per cent of our interns leave without hernias.
And after you’ve done all that, and painted the walls (around $1,500 to $2,000 for most four to five room units), you can start working out the…
5. Property tax
Your property tax depends on the Annual Valuation (AV) of your home. The AV is based on how much the government thinks you could rent your property for (even if you don’t rent it). So if your property could be rented out for $3,000 a month, you would have an AV of $36,000.
(At the time of writing, Singapore’s rental market has taken a worse beating than a henchman in a kung-fu movie, so a rental income of $3,000 for a mass market condo really is possible. That’s almost no different from some HDB flats).
The Inland Revenue Authority of Singapore (IRAS) has a tiered system used to calculate the property tax; but for simplicity’s sake, an AV of $36,000 means you’d pay $1,120 a year.
Good luck with getting that condo!
Just remember, what seems impossible and out of reach, can become a reality with slow and constant effort. Your CPF contributions are probably higher than you think, as your employer tops up and additional 16 per cent; and compounded over 10 or 20 years, you can probably afford more than you imagine.
This story was first published on Ezbuy.