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10 Tips For Millennials Looking To Buy A Home In Singapore!

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It’s challenging for a millennial in Singapore to get a home they can call their own. A lot of young, single Singaporeans want to move out of their parents’ homes to live a life on their own, but the spiralling home prices have made it more difficult for them to get on the property ladder.

The article discusses why millennials (or the Gen Y) are feeling the heat when it comes to homeownership, things they should look out for when buying a house, and some valuable tips for millennials to gain confidence around the home purchasing process before making a property decision.

Why are millennials struggling to buy homes?

Millennials in Singapore are not buying homes as readily as the previous generation. The housing supply crunch and exorbitant home prices are the two biggest reasons contributing to widening the affordability gap and forcing a lot of young adults to rethink their options.

Tighter lending standards by banks and financial institutions to reduce default risk have made home-buying unaffordable or virtually impossible, especially for those with bad or no credit history. Furthermore, the burden of student loan debt and personal financial problems is also holding back many millennials from buying a new home. A student loan affects the approval of their home loan application.

However, note that affordability is not the only reason here. Other social factors like delay in getting married and having children have affected homeownership. Today, millennials are living at home with their parents for a longer time, which is also delaying their first home purchase.

While this holds true, according to Singapore Consumer Sentiment Study H2 2021, 71% of millennials prioritise saving up for a home, and 69% of millennial HDB owners intend to upgrade to private property after selling their HDB housing.

Experts believe millennials are one of the fastest-growing segments of home buyers in Singapore and are poised to reshape the housing market. The millennial dream is to buy a home, even if it isn’t a dream home!

What do millennials look for when buying a home?

Today, millennials have high expectations and spend a lot of time researching on the internet before they make a home-buying decision. Expect them to have a good idea of what they want in their new house, apart from competitive mortgage rates. Here are the top five consideration millennial have when buying a home:

Location. Unsurprisingly, location or area is key for millennials when buying a property. Young home buyers prefer their homes in proximity to the MRT, making it convenient for them to get to the CBD. Young families with small kids or those planning to have kids also like to have their homes close to markets and schools.

Size/quality of living space. Now that a lot of millennials are working from home, spaciousness and efficient layouts attract millennial buyers. An open floor plan allows them to configure the space in a way that works best for them.

Price. With rising home prices, millennial buyers are indeed price-sensitive. They would jump to a property available at a below-market price and use it for their own stay or as an investment. Similarly, newer developments or 2- or 3-bedroom resale units are likely to attract more millennial buyers due to their lower price points.

Proximity to family. A lot of millennials want their homes to be in closer geographic proximity to their parents or other family members. The reasons can be either or both – financial and emotional.

Lifestyle. A millennial homebuyer’s lifestyle can influence their decision to purchase a property. Just like someone with an urban lifestyle can gravitate towards apartments in a central location with a lot of eateries and restaurants nearby, someone who needs to go to their workplace daily would look for a condo near a bus interchange or MRT station.

On the other hand, nature lovers or who want to stay away from the city noise would prefer a development near the suburbs.  

Tips to buy a new home for Singapore Millennials

While investing in the property market is appealing, millennials should exercise prudence and optimise their homeownership expectations based on their financial situation and housing needs. Check out ten useful tips for millennial buyers for their first property purchase.

1. Understand and compare available home loan options (check your eligibility)

Start with finding what home loan options are available, depending on your eligibility. This will help you realise what property type you are eligible to buy and how much of your savings you need to pay upfront.

HDB loan charges 2.6% but allows you to get a higher loan amount (up to 85% of the property price). On the other hand, a bank loan may be cheaper than an HDB loan; it demands you to cough up a 25% downpayment upfront to buy a house in Singapore.

If you can’t afford to pay a hefty downpayment at the time of purchase, you could start by taking an HDB loan and refinance to a bank loan later for cheaper interest rates once you have cleared off a portion of your debt and have increased earnings potential. However, remember that you can’t refinance back to an HDB loan from a bank loan.

Reach out to one of our mortgage consultants in Singapore to guide you through the process and help you score the best home loan or refinancing deals, considering your unique circumstances.

2. Know how much you can afford (check your CPF account)

If you plan on taking a bank loan to finance your home purchase, start planning a few years ahead so that you can save up substantial money for the downpayment.

Get your finances in order and give yourself enough time to find a competitive bank loan at a cheaper rate. It also makes sense to figure out how much you can afford to pay in downpayment and monthly repayments. Log in to your CPF account to check CPF savings, which you can use for your downpayment and monthly mortgage repayments.

You can consult a mortgage consultant for advice on how much of your available CPF savings you should use for your home purchase.

It is also recommended to use online tools like home loan affordability calculators to help estimate how much you can afford while also considering your CPF monies and current earning capabilities.

3. List down your priorities and requirements when buying a home

Make two lists of your ‘needs’ versus ‘wants’ to set your expectations when searching for a good location or area of your new house. Think about your lifestyle, current job, and personal preferences while creating the lists.

Note down if you can’t do without at least a level four flat or need an unblocked view for privacy. If you are a single buyer or don’t like cooking, you might want to have some eateries or restaurants in the proximity of your home. It might be important for you to live closer to your family home, so you should consider your potential home location accordingly.

The ‘wants’ list could include options like a high-floor or windy apartment, availability of a shopping mall nearby, walking distance from public transport, etc. Try to keep a balance between your ‘wants’ and ‘needs’ as you practically can’t get the best of both worlds unless you have a super high budget, of course!

4. Pay close attention to those minor details

Little things matter too, a lot! For example, your housing direction. You must pay close attention to the direction your house faces, and the way the sun hits your unit will impact how much sunlight it will get or how hot your home will be during the day.

Many people would like to avoid a settling sun as it tends to heat homes quickly, but don’t overlook how it would affect the natural light in their home. You don’t want a house that hardly sees the sun and insists on switching lights on even during the day.

Never underestimate the importance of good lighting and ventilation in your home, especially when a lot of companies are planning to continue with work-from-home models.

5. Design and renovate your home according to your needs and budget

It is crucial to design your space according to your needs and renovate it in line with your budget. For example, when renovating your newly-bought home, you can follow the DIY route to save money on renovation.

You can get the most affordable furniture that matches your taste or take the help of your family members for painting. Make sure you design the house to your needs, and every element you opt for will be used and kept. The last thing you want is to spend more money on removing those things you once opted in for!

Keep the renovation costs in mind as you take the freedom to redesign and renovate your newly-bought home. On average, Singaporeans spend up to $50,750 on renovating their homes (4-room apartments). This is also why some millennial buyers take renovation loans on top of their home loans.

If you have specific renovation demands, you may have to spend more money on the renovation of your BTO since a new BTO flat is almost like a blank canvas. The good part is that you can design it into your dream home without spending on removing the structures put in place by previous buyers for resale flats.

6. Prepare yourself for your first property purchase

You have to ready yourself before making your first property purchase. Ask yourself if you plan to buy the home for your own stay or as an investment. Think about whether you want to sell the property after the MOP (Minimum Occupation Period) and upgrade or rent it out for rental income. Be clear about when you plan to get married or have children so you can make the right property purchase decisions.

Try to comprehend the different property and mortgage jargon, such as Mortgage Servicing Ratio (MSR), Total Debt Servicing Ratio (TDSR), and Loan to Value (LTV) in detail. It will help you make a more informed choice on which home loan option to choose.

Stay updated with the latest property news like upcoming BTO or condominium launches, infrastructure developments in your desired area, last transaction prices and so on. Ask questions to find answers to your property-related queries, and try to view the property physically at least once before signing the dotted line.

You can also contact us for advice and straightforward answers to your questions! Our team of experienced mortgage consultants can help you understand things that you don’t understand on your own and give answers to all your mortgage-related questions.

7. When failing to get a BTO flat again and again, consider buying an HDB resale flat instead

The next tip is a nugget of wisdom for all millennial homebuyers.

As a modern millennial couple, you would fancy having your new home in a popular BTO estate. So imagine you applied for a new BTO flat in a mature estate through the balloting process but got rejected.

Since the demand for BTO homes is extremely high, you failed to land a ballot even in the next year’s first BTO release in a non-mature estate. In the subsequent releases that year, you were disappointed that the BTO flats did not meet your must-haves. You ended up waiting for about 2 or 3 years, which could even extend further, to get a BTO flat.

The wait is not limited to landing a ballot. Add in wait during the BTO’s construction, which could delay by 1 or 2 years considering the current labour and supply chain problems. So, you could end up waiting for 4 to 6 years to get your BTO flat. Moreover, your current personal and financial situation could change drastically over this period, which can affect the choice of flat you made years ago.

Therefore, if you fail to get a BTO flat after a couple of years, you should not remain stuck – widen your net, revisit your priorities, and go for an HDB flat in the resale market instead.

Although resale HDB flats are older and more expensive, they are typically larger, usually come with fittings from previous owners, and have a maximum housing grant value of $160,000, which might help you balance out the higher price.

8. When buying for investment, buy public property first and private property later

If you are buying a property as an investment and hoping to buy more in future, it is crucial to know what you should buy first.

Remember that you can’t buy HDB housing if you already own private property. If you decide to buy an HDB flat later, you must sell your private property first or within six months of your HDB purchase. Therefore, millennial buyers with good income potential should buy public housing first and upgrade to the private property later.

It is advised not to jump straight into purchasing a condo that has just completed its TOP (temporary occupation permit) just because you can afford it! Also, don’t forget to factor in the Additional Buyer’s Stamp Duty (ABSD) fees in your budget if you are buying more than one property.

9. Renting could be an alternative housing arrangement

If buying a home doesn’t seem the best option right now, you could consider renting a house too.

Singapore millennials are generally income-rich and liquid-asset-poor, which makes renting a home a more flexible option. It allows them the flexibility to move to a new city without worrying about leaving their home behind. In fact, renting makes trendier, more desirable areas of town accessible to millennials who can’t afford to buy a home in that locality, at this point.

Unlike renting, buying burdens you with additional costs like stamp duty, option fee, home insurance payments, property taxes, etc., on top of the monthly mortgage instalments. Renting keeps you from the hassles of property fees and taxes other than your fixed monthly rent.

Furthermore, if you and your partner are exploring different paths in life but still want to move in together, you might want to consider renting a house over buying one in such a situation.

10. Don’t refrain from getting a property agent if you have a busy lifestyle

If you have no time to deal with the details, don’t hesitate to work with extra help in your home-buying journey. While hiring a professional property agent is not essential, consulting one could help save you time and money.

They can bring many years of experience in the real estate market to the table. They know the market well enough to find a great deal on the home that matches your budget and expectations.

A talented property agent is up-to-date with new property projects to be launched soon and can arrange multiple viewings for you, one after the other, in your desired location. Your property agent will guide you on the numerous steps and processes involved in buying a home, which can be challenging for newbies without help.

Furthermore, they can also help you with some financial hacks to save money which you might miss out on otherwise!

Final Thoughts

While this is a generation of tech-savvy millennials that likes to make informed decisions based on plenty of research, buying a property can sometimes be confusing and complicated, especially for first-timers. We hope these tips and insights about home purchasing will help you see the broader picture and not lose a sense of your financial goals.

Before you take advice from friends and family members about your home purchase decision, remember that everyone has different needs and preferences. Ultimately, your final decision should depend on your unique situation.  

Get the best home loan in Singapore across all major banks and compare mortgage rates with the highest rewards.

Enjoy the lowest mortgage loan rates when you refinance a home loan or buy a new property!

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