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$5,511 Is The Minimum Salary To Afford A Condo In Singapore!

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Have you ever wondered how much is the minimum salary you need to earn to afford a condo in Singapore? Owning a condominium in this bustling city-state is often seen as a milestone—part of the so-called ‘Singaporean dream’.

The allure of condo living in Singapore is undeniable, with its promises of luxury amenities, strategic locations, and a prestigious lifestyle. However, the path to condo ownership comprises substantial financial planning due to the relatively high cost associated with these properties.

Despite the daunting price tags, prospective buyers have a ray of hope. With the right financial strategy and understanding of the property market, owning your dream condo might be more achievable than you think. Let’s delve into what it truly takes to make this significant lifestyle upgrade in 2024.

Ps: Skip to read, how to afford a condo with a monthly salary of $5,511

Understanding Condo Prices in Singapore

Singapore condo prices vary widely, influenced by location, amenities, prevailing market trends and other factors. To truly grasp what drives these prices, one must consider various elements beyond the basic structure of the buildings.

How much does a condo cost in Singapore?

Condominiums in Singapore come with a diverse price range, heavily influenced by their location and the amenities they offer. Properties closer to the city centre or those with luxurious facilities like private pools, gyms, and concierge services tend to command higher prices.

Additionally, the age of the building and whether it is freehold or leasehold can significantly affect the price—older and leasehold properties typically come at lower costs but may involve higher maintenance or renewal fees in the long run.

The size of the unit and its layout also play critical roles in determining its cost. Larger units with more bedrooms and expansive views are priced higher, catering to those looking for spacious living quarters or investment properties that can attract families.

Focusing on 3-bedroom condos offers a practical insight into the market, as these units are popular among families and young couples looking for ample living space combined with the conveniences of condo life.

Outside Central Region (OCR): Prices for 3-bedroom units in this area range from $900,000 to $1.5 million. The OCR is known for its more affordable housing options, with older and leasehold properties at the lower end of this price spectrum. This region is ideal for buyers looking for value-for-money investments and those new to condo living.

Rest of Central Region (RCR): Moving closer to the heart of the city, 3-bedroom condos in the RCR can cost between $1.5 million and $3 million. Areas like Aljunied, Paya Lebar, and Geylang offer relatively affordable options within the RCR, providing a balance between proximity to central business districts and a more manageable price tag.

Core Central Region (CCR): The epitome of luxury living, the CCR houses the most expensive condos in Singapore, with prices starting from $2.5 million. These properties often come with premium amenities and are situated in prestigious neighbourhoods, catering to the upper echelons of society and investors looking for high-value assets.

These price variations by region underscore the importance of location in real estate pricing and the need to carefully assess what each area offers in terms of lifestyle, investment potential, and overall value.

Income Requirements to Buy a Condo

Buying a condo in Singapore is a significant financial commitment that requires careful planning and consideration of one’s financial capacity. It’s essential to understand the general salary requirements along with the breakdown of various costs associated with purchasing a condo to determine if you can afford a condominium.

General salary requirements

The ability to afford a condominium in Singapore largely depends on your salary, as it dictates your borrowing capacity and ability to manage ongoing expenses. As a rule of thumb, your monthly home loan repayments should not exceed 30% of your gross monthly income. That ensures you can comfortably manage other living expenses and financial commitments without overstretching your budget.

To put this into perspective, if you aim to buy a Singapore condo priced at $1.5 million in the RCR, you would typically need a household income of at least $15,000 to $20,000 per month. This range ensures you can cover the mortgage and other living expenses while adhering to financial prudence.

Components of condo purchasing costs

Downpayment: The initial cost is the downpayment for a condo, typically 25% of the purchase price. That includes 5% in cash and the remaining 20% can be paid through CPF savings or additional cash. A $1.5 million condo, for example, translates to a cash payment of at least $75,000 and up to $300,000 through CPF or additional cash.

Monthly instalments: A larger portion of the purchasing cost comes from monthly mortgage repayments. Assuming a 75% loan on a $1.5 million property, you would borrow approximately $1,125,000. A typical home loan interest rate of about 2.5% on a 30-year loan tenure in Singapore will have a monthly instalment of around $4,450.

Additional costs:

  • Buyer’s Stamp Duty (BSD): This is a tax paid on documents signed when you buy or acquire property in Singapore. For a $1.5 million condo for sale in Singapore, the BSD would be about $44,600, following the progressive rates.
  • Maintenance fees: These recurring fees cover the costs of maintaining the condo facilities like security, swimming pools, gymnasiums, etc., and can range from $300 to $1,000 monthly, depending on the condo’s facilities and luxury level.
  • Property taxes: Annual property taxes are calculated based on the annual value of the property, which is typically a percentage of the property’s rental value

It is crucial to understand these costs and how they translate into monthly and upfront financial commitments. By assessing these alongside your income and savings, you can determine the affordability of a condo in Singapore. This preparation ensures that when you buy a condo, it aligns with your financial goals and lifestyle needs, preventing potential financial strain.

Before we dig deep into how much salary you need to buy a condo in Singapore, homebuyers must understand the role of downpayment, loan tenure, and available financing options.

The Role of Downpayments in Condo Purchases

The downpayment for a condo is one of the most substantial initial costs a buyer faces and impacts the overall financial commitment. When financing through a bank loan, the minimum downpayment for a condo in Singapore is typically 25% of the purchase price. This portion must be split into 5% in cash, and the remaining 20% through cash or CPF funds.

Impact of downpayment size

A larger downpayment reduces the principal amount borrowed, which decreases the interest costs over the life of the loan and lowers monthly mortgage payments.

For instance, on a $1.5 million Singapore condo, a 25% downpayment equates to $375,000, reducing the loan amount to $1,125,000. If a buyer increases the downpayment to 30%, the loan amount drops significantly, further decreasing the financial burden.

Strategies for accumulating a downpayment

  • Savings plan: Establish a disciplined savings plan. Set aside a fixed percentage of your monthly income towards the downpayment. High-interest savings accounts or fixed deposits can be effective for growing your savings.
  • Investments: Consider investing in low-risk assets like bonds or mutual funds that offer higher returns than regular savings accounts.
  • CPF usage: Utilise your CPF Ordinary Account savings to cover part of the downpayment. Regular contributions to your CPF can build a substantial amount over time, which can go towards your property purchase.
  • Budget management: Reduce unnecessary expenditures to boost your savings rate. That might include cutting back on luxury items, dining out less frequently, or avoiding frequent vacations.
  • Government grants: For eligible buyers, such as first-timers or those upgrading from an HDB to a private condo, government grants and subsidies can ease the financial strain. Consider researching available schemes to maximise the benefits.

Exploring Loan Options and Tenures for Condo Purchases

Choosing the right financing option is crucial in managing the long-term costs related to purchasing a condo. In Singapore, potential buyers can secure a bank loan or HDB loan (if eligible) for executive condominiums (not applicable for all condo purchases).

Bank loans vs. HDB loans

  • Bank loans: In 2024, banks offer higher interest rates than HDB loans, but these may go down from current levels in the latter half of the year. The maximum loan tenure for a bank loan can go up to 30 years for private properties, which affects the total interest paid and monthly repayment amounts.
  • HDB loans: Available only for eligible buyers of executive condominiums and come with a fixed interest rate of 2.6%. The stability of the rate can be advantageous in a volatile market, but the rate is generally higher than what banks offer.

Advantages of choosing the right home loan tenure

  • Longer loan tenures: While a longer tenure, such as 30 years, can make monthly payments more manageable by spreading them out, it increases the total interest paid over the life of the loan.
  • Shorter loan tenures: Opting for a shorter tenure, like 15-20 years, can result in higher monthly payments but significantly reduces the total interest cost. This option is ideal for those with income stability and who wish to minimise their total payment.

Considerations for loan tenure

  • Home loan maximum tenure: Typically, the maximum tenure for a bank loan is 35 years or until the borrower reaches 65 years of age, whichever is earlier. This cap is designed to ensure that loans are paid off before retirement.
  • Home loan minimum tenure: The minimum loan tenure would be 5 years across majority of banks and dependent on the borrower’s financial capacity to handle higher monthly payments.

How Much Salary to Buy a Condo in Singapore Per Month?

Purchasing a condo for sale in Singapore is a significant financial commitment, requiring careful planning and understanding of one’s financial capabilities.

To determine how much salary is needed per month to afford a condo, it’s crucial to work backwards from the desired income, considering various financial components such as downpayment, loan quantum, and the TDSR. That ensures you buy within your means and maintain financial stability.

First, decide on the target price of the condo you wish to purchase. For example, let’s use a mid-range condo in the RCR priced at $1.5 million.

Now, let’s understand the breakdown of the key factors to consider:

Calculate the downpayment and loan quantum

In Singapore, buying a condominium requires a downpayment of 25% of the purchase price wherein at least 5% must be paid in cash. If a condo is priced at $1,500,000, the downpayment would be $375,000, with a minimum of $75,000 in cash.

Typically, the loan-to-value (LTV) limit for most first-time buyers without existing home loans is up to 75%. It means the bank or financial institution can finance up to 75% of the property’s value. Thus, for a $1.5 million Singapore condo, the loan quantum would be $1,500,000 × 75% = $1,125,000.

Calculate the monthly mortgage repayments

The monthly repayment depends on the loan amount, the interest rate, and the desired loan tenure (commonly 25 to 30 years in Singapore).

Assuming an interest rate of 3.5% over 30 years for a loan amount of $1,125,000, the monthly mortgage repayments would be approximately $5,052. This calculation is pivotal for understanding how much one needs to earn to comfortably manage these payments without compromising other financial obligations.

TDSR calculation and affordability

The Total Debt Servicing Ratio (TDSR) is a key metric banks use to assess your ability to repay your mortgage. In Singapore, the maximum TDSR for condo loans is 55%. That means your total debt obligations (including your mortgage payment) cannot exceed 55% of your gross monthly income.

To comfortably afford the monthly mortgage payment of $5,052 for the condo, a potential buyer would need a minimum gross monthly income of about $9,185, ensuring all debt obligations do not surpass the 55% threshold.

For prospective buyers considering a lower TDSR for additional financial comfort, aligning their debt obligations to perhaps 40% of their income might be safer. It allows buyers for more financial breathing room and unexpected expenses. But this adjustment means a higher income to maintain the same loan amount. For a 40% TDSR, the required income would be about $12,629.

Remember, affordability goes beyond just meeting the minimum TDSR. Ideally, housing expenses should not exceed 30% of your gross monthly income to ensure a comfortable lifestyle.

If the median gross monthly income in Singapore is around $5,000, a single individual earning the median salary might find it challenging to afford a $1,500,000 condo on their own due to the TDSR limit. Singapore condo prices can hover well over $5 million in prime locations or core central regions.

Affordability for dual-income households

A dual-income household with a combined income of $10,000 could comfortably manage the mortgage and remain within the safe limits of their debt obligations. It becomes more feasible, particularly in regions like the Outside Central Region and the Rest of Central Region, where condo prices are relatively lower.

For example, for a condo priced at $900,000 in the OCR, with a 25% downpayment, resulting in a loan amount of $675,000, the estimated monthly mortgage repayment at an interest rate of 3.5% over a 30-year tenure would be approximately $3,031.

To comfortably afford this monthly mortgage repayment under a TDSR of 55%, a minimum gross monthly income of about $5,511 (= $3,031/0.55) would be required.

Comparing this with the median Singaporean salary, which was reported as $5,197 in 2023, it indicates that buying a condo in the OCR might be within reach for many dual-income households, especially if both partners are earning. It highlights that condominium ownership in certain regions of Singapore can be quite feasible for working couples without additional debt obligations.

Remember, this is a simplified example. Property prices vary greatly, and other factors like buyer’s stamp duty, maintenance fees, property taxes and other future expenses must be considered. The key takeaway is to plan your finances carefully and ensure condo ownership complements your long-term financial goals.

Understanding these financial metrics and planning accordingly can help potential buyers determine if they can afford their dream condo in Singapore, ensuring they do not overextend themselves financially.

Financial Planning and Affordability Considerations

Here are key considerations for financial planning when purchasing a Singapore condo:

  • Future expenses: Account for potential changes like family growth, educational needs, and retirement.
  • Income fluctuations: Prepare for possible income variations due to career changes or unforeseen events.
  • Financial tools: Utilise online affordability calculators to understand your financial capacity and plan for long-term comfort rather than just meeting immediate affordability.
  • Holistic financial health: Ensure the mortgage fits comfortably within your broader financial strategy, not just immediate affordability.
  • Improvement tips: Work on enhancing your credit score, reducing debts, and increasing savings to secure a home loan tenure that suits your financial situation.

When planning to buy a condo in Singapore, consider more than just your current income. Enhance your financial health by diversifying income sources and consulting with financial advisors. These key considerations help ensure you can manage the financial responsibility of condo ownership comfortably, maintaining financial stability while achieving your property goals.

Final Thoughts

Strategic income planning is paramount in navigating Singapore’s varied condo market, from the cheapest condo in Singapore to premium options. Understanding that affordability transcends just meeting minimum income, especially when considering diverse condo prices, is crucial.

Potential condo buyers are encouraged to meticulously plan and consult experts as they explore their condo buying options thoroughly to ensure a sound investment. Get the best home loan Singapore across all major banks and compare mortgage rates with the highest rewards.

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