Friday 7 October 2016

Can afford a place of our own after working for 5 years

Very few countries (or cities) in the world can young couples afford to buy a place of their own just after working for 5 years.

Singapore is one such place.

Of course I'm not talking about private properties.

But if it's HDB BTO 3 room in mature estates and HDB BTO 4 room in new (euphemism for ulu) estates - they cost about the same around $400K? Its more a choice between better location or bigger space.

And if you don't mind low floor as on 2nd level, can get for $300K.

You do the math.
20% of $400K is $80K, and divided by 2 people is $40K.

If you can't earn and save $40K after working for 5 years, why are you wasting your time talking about financial freedom and your goal of quitting work by 35?

Surely you have more pressing matters to attend to?

For those young couples amongst you who don't think you are "average", you better act fast before a quick flurry of promotions and pay raises will disqualify you from the 2 bites of the cherry HDB upgrade game.

Singapore is not cheap.

But one thing we should be thankful for is affordable public housing .

I know. Many will like to compare with third world emerging countries. But often you never compare the average salaries and affordability from local perspective there.

For those of you who don't like to tell little lies to oneself, its better to compare Singapore with cosmopolitan cities like Hong Kong, Shanghai, London, New York, Sydney, etc.


  1. Hi SMOL

    The trick is in that 20% downpayment.

    After working 5 years, then it's the start of the journey to pay off the rest of the 80% loan :)

    1. B,

      And that's not a problem for even a single income household - just as long you buy what you can afford the first time round.

      That's why the 2 bites of the cherry is so attractive!

      Start with HDB 3 or 4 rooms first, then 5 years later when you have children and need more space, upgrade to HDB 5 room.

      Whether one can parlay our HDB to a condo or 2nd investment/rental property may depend on our progress on the corporate ladder (aggressive investor profile); or we choose to pay down our HDB loan ASAP and focus on being debt free (conservative profile) and getting financially free earlier (freedom seeker).

      There are many options.

      Of course this is moot if the young 20 something is "dumb" enough to transfer his CPF ordinary savings to special account early in his career.

      We can't pay down bank loans with CPF special account, can we?

    2. Quote : "Of course this is moot if the young 20 something is "dumb" enough to transfer his CPF ordinary savings to special account early in his career."

      Not so young also must think think think and think before transferring CPF OA to CPF SA. If still not clear why and you want to hear from Horse's mouth on alternate view.

      You got $10 to spare for two cups of Kopi and Roti?

    3. CW,

      Aiyoh! Next week I'll write a special advertorial for your kopi and roti one-to-one consultancy ;)

      This CPF transfer from OA to SA makes sense when:

      a) You already have secured a place of your own;

      b) When you have a sizeable equity portfolio and wishes to have CPF SA as an alternative to bonds as you diversify your portfolio as part of an overall asset allocation strategy.

      c) You are risk adverse and you would prefer the earn more; save more route - you say no to equity or property investing.

      Even better when you are in your 40s. Can withdraw the excess from CPF when you hit 55 mah! So it's like buying a 10 year bond with zero risk of capital loss ;)

  2. Hi SmOl,

    I am close to my 40s, many of my peers/ distant elders ask me if I have finished my HDB loan, I said I have not. Some will look at me with "see u no up eyes".

    I don't usually explained, but everyone to its own circumstances:

    1) I paid 86% of my mortgage while my wife 14%. She can stop working now and will not have a CPF mortgage problem.

    That is also a leverage I used for her to think twice when once in a while she wanted private when the hole in the heart gets poked.

    2) no, I didn't use my money for investment but I think transfer some to SA, whatever that is still growing very slowly in my OA, I wanted it as a back up for my son's university or my third or forth shot when markets goes down, and I run out of "cash"

    If I mismifred twice in market using cash, market should be more than 50% off, I think CPF investment should easily land myself in the 16% cohort.

    1. Sillyinvestor,


      Its better to make our own mistakes than follow other people's mistakes.

      At the very least, we can learn from our own mistakes (maybe)!

      Everyone's situation is different.

      When I bought my HDB 3 room resale at 35, I can pay it in full using cash or CPF.

      I chose neither.

      I made sure I moved most of my investable CPF funds into unit trusts before I applied for my private bank loan for 30 years - payment till age 65. This way HDB/CPF can't grab hold of my CPF funds ;)

      I sneered to the ever so "kind" CPF reminder that we should pay up our housing loans by age 55.

      People complained no opportunity fund when opportunity comes. Well, I wasn't complaining when 2008/09 came ;)

      I'll probably be "forced" to repay my housing loan 4 years later at age 54 due to my en-bloc. HDB will repay the compensation funds on any outstanding loans first before giving the balance in cash to me :(

      Oh well!

      Can't complain as after eating it, I still have my cake :)

      The CPF funds I refused to use for housing is still available for opportunistic investing (grown faster than my housing loan interest); and I have a fully paid new HDB flat in 4 years time :)

      Now its fashionable to talk about cash flow.

      I not sure "bei kambings" really understood the meaning correctly.

      It is not "cash flow" if its locked up somewhere cannot touch...

      CPF is not as liquid as cash, but we can use it for housing, education, investments, and what not. Just don't put it in the wrong account!

  3. You are being conservative :) I go to HDB website regularly, both for myself (yah yah if the right cherry comes along) and my bro-in-law.

    Hmmm. If I remember correctly, a standard 4-Rm BTO (e.g. Sembawang) can go as low as $250K nowadays. If taking HDB loan, downpayment 10% only. First timer under 30s even more flexible with staggered down-payment scheme, sign agreement for lease 5%, collect keys 5%.

    For most people, it is very affordable since you have CPF and cash to play with. This is how I got my first BTO after working only for a year or two.

    To me, it is not affording a place that is difficult. It is managing the expectations (e.g. other people live in condo) that is difficult.

    1. Kevin,

      Yes, it was deliberate ;)

      Snake-oils use several techniques. Often you see us using "hyperbole" - big, bigger, best!

      For this post, I used the "reversed under promise over deliver" technique.

      The prices I quoted are the upper bound range for premium BTO at higher floors.

      And the loan deposit quantum I used is 20% from private banks.

      This way, denials who are out to prove me "wrong" will discover for themselves the various schemes you have mentioned ;)

      Again, something quite unique in Singapore.

      All things being equal and with a dose of luck, young couples who married at age 25, after 2 bites of the HDB cherry, can probably parlay their HDB flat to a condo at age 35.

      While those who got married at age 35 and straight away jump to condo (can't qualify for HDB) may envy and question their peers who got married 10 years earlier - how on earth they can pay 50% of their condo deposit?


  4. Nice post. It's exactly like what you said. I was in HK for work 2 weeks back and my colleagues (who are in their 30s) were lamenting how they could never buy their own property. In fact, almost all whom I spoke with were renting their properties and even the rental are exorbitant (for the space they are renting). In that respect, we are indeed luckier than our HK counterparts.

    1. Kate,


      So envious of you!

      You studied in Japan!!!

      I like Japanese culture (maybe the kawaii women more).

      You may notice if you spend more time in HK is that your HK colleagues will never invite you to their tiny apartments unless you both are super buddies.

      Home in HK is to sleep.

      Most will loiter outside as their homes can be quite claustrophobic.

      That's why HK has a very interesting night life!

      Love that city! Was in Shekou (Shenzhen) for 5 months and every other weekends, I'll just hop over to HK for my "cultural exchanges" ;)


  5. Lol Japanese homes are also pretty small to be honest. The apartment that I stayed in was small, but self-sufficient. Yes HK homes are tiny. A colleague just moved into her new place and she sent me photos. In fact, this inspired me to write an article on downsizing. A totally unrelated topic but something that I had wanted to explore.

    Will be interested to hear your thoughts :)

    1. Kate,

      Didn't know there's a minimalistic community here in Singapore ;)



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