Contributed by Credit Bureau Singapore
The 2019 Deloitte Millenial Survey has found that Singapore’s millennials are amongst some of the gloomiest millenials in the world and are pessimistic about the economy in the next one year. Furthermore, CNBC has reported that Singapore is second on the list of most expensive housing markets in the world. Put together both of the aforementioned and it will not come as a surprise that the purchasing of the first home for millennials may be rather confusing and daunting.
However, please be assured that purchasing a house is extremely doable. This article seeks to provide you with the confidence moving forward, with some tips on what to look out for whilst holding on to such a huge responsibility in the future. Read on to know more about affording a HDB flat or executive condominium, both which millennials are more likely to purchase for their first homes.
HDBs are basically the cheapest option of housing in Singapore, and is also known as public housing. In order to be eligible for a HDB flat, you actually do have a few boxes to check off before you are deemed entitled to purchase a flat. Often, the eligibility schemes are very stringent and there is a low income ceiling to ensure that the flats are available to those who are unable to purchase more expensive housing in Singapore. As at 11 September 2019, this income ceiling has been raised from $12,000 to $14,000 for families, and $6,000 to $7,000 for singles.
When purchasing a HDB flat, you are able to decide between taking a loan with HDB or with the bank; the difference is the Loan to Value limit, whereby you only need to pay 10% of the down-payment if you take a loan with the former, as compared to 25% if you take a bank loan.
There are many types of grants which you may be eligible for when applying for a HDB. By default, those who have been cleared for a HDB flat will qualify for the CPF housing grants. Thereafter, based on your circumstances, you may or may not receive other types on grants. It is important to do your research first in order to fully maximise the number of grants you can receive
Executive condominiums are only eligible for those who have a minimum income of $16,000. They are rather special, as they go from public housing to private housing after 10 years. This means that their value goes up substantially and are generally seen as a better investment as compared to HDB flats.
Executive condominiums are generally more expensive, also because you are only able to take 75% of the loans from banks as opposed to the 90% for HDB loans. However, it is also quite similar to the HDB as there is a minimum occupancy period of 5 years before you are able to sell it.
Whilst there are other types of housing in Singapore that are private, majority of the millennials will turn to public housing as a first step into the housing industry as it is much more affordable, and loans will be easier to repay as compared to private housing. Unlike all other loans, housing loans probably take up the bulk of your debt, hence it is highly advised to do extensive research and find out what grants you are eligible for before investing in a home.
If what you’ve read above has been helpful, you should follow Credit Bureau Singapore’s (CBS) Facebook and Instagram @creditbureausingapore to find out more of such information and even tips on how to stay credit worthy!