Singapore is a city-state known for its strict policies, excellent administration, and overall high standard of living. The city is also renowned for its immense cost of living, a reputation consistent with results from the latest Economist Intelligence Unit survey. That survey revealed that Singapore is the most expensive city to live in in the world, along with Zurich.
Like in any major city, the cost of housing is a significant expense for those living in Singapore. Due to its limited land area, housing in the city is expensive. However, the government’s effective housing policies have consistently earned Singapore high rankings among the places with the highest home ownership rates in the world.
Therefore, despite being the most expensive city in the world, Singapore’s housing market remains highly attractive. Even those without vast sums of money can buy affordable homes here.
This article discusses in detail the housing options in Singapore and provides the ultimate guide on how you can buy a home you can afford in this city.
Being a city-state, housing in Singapore can be prohibitively expensive if left to the free market due to limited land and high demand. To mitigate this, the government has implemented several safeguards that allow most people to own their homes.
One key strategy is providing multiple housing options to Singapore residents. When buying a house, you should consider the different types available to find the one that best suits your needs. The primary housing options in Singapore include public housing flats, private apartments, and landed properties, such as bungalows and semi-detached houses. Public housing flats, also known as Housing and Development Board (HDB) flats, are subsidized by the government and are typically the most affordable option. Such flats house around 80% of Singapore’s population. They come in various sizes and are located in different neighbourhoods throughout the country. In contrast, private apartments and landed properties tend to be more expensive but offer more space and amenities.
While the general perception of Singapore housing often includes colonial mansions and luxurious bungalows, thanks to works like Crazy Rich Asians, Housing and Development Board flats are widely considered the great housing triumph of the Singapore government. These flats are affordable yet high-quality, with excellent amenities provided by the government. Additionally, owners are allowed to renovate their flats to create their ideal homes. For anyone looking for an affordable home, HDB flats are the best bet.
Factors to Consider before Buying a Home in Singapore
Buying a house is one of the most significant decisions you can make in your life. Therefore, it requires plenty of consideration, planning, and a long-term vision to finally end up with a home that meets all your requirements and goals. Here are some factors that you should closely consider before buying a home in Singapore:
Location
Like any other place, location is a massive factor in determining property prices in Singapore. Furthermore, the location of your home can have a significant impact on your lifestyle, commute, and resale value, while the amenities near your house, such as schools, gyms, and food centres greatly affect your way of life. Hence, it is imperative to consider factors such as your proximity to said amenities, like public transportation, schools, shopping centres, and entertainment options.
Housing Type
The price point of housing in Singapore can differ massively depending on its housing type. Housing and Development Board flats are government subsidized; therefore, they can be considered a far more affordable option than the private properties on the market. Singapore also has condominiums and landed properties in the market, which are trademarks of the local architecture.
Budget
Your budget is another important consideration when buying a home in Singapore. Singapore has a high cost of living and housing prices can be expensive. It is important to have a clear understanding of your financial situation in determining what you can realistically afford. This may include accounting for your income, expenses, and any other financial obligations you have.
Financing Options
When buying a home in Singapore, you have several financing options to choose from. These include taking out a home loan from a bank or financial institution, using your Central Provident Fund savings, or a combination of both. Therefore, it is important to research the different financing options available and compare the interest rates, repayment terms, and other fees associated with each option.
Maintenance Costs
In addition to the purchase price of the property, you need to consider the ongoing maintenance costs. This may include expenses such as property taxes, maintenance fees, and repairs. You may want to research the typical maintenance costs for properties in the area you are interested in and factor these costs into your budget.
Resale Value
Before agreeing on your mortgage, one of the most crucial factors to consider about your property is its resale value. Buying a house anywhere, but especially in Singapore, is a massive investment, so you have to ensure that when the time arrives, you get an excellent return on your investment. The resale value of a home can depend on different factors, such as the location, condition of the property, and overall demand for homes in the area.
How to Finance Your Home Purchase in Singapore
Once you have decided on the house you want to buy, your next step is to figure out how to finance your mortgage for the house. Despite there being government-subsidized housing, Singapore is not insulated from the inflationary trends around the world. While Singapore has long been considered one of the most expensive cities in the world, its property prices have seen an upward trend over the years. It’s quite likely that many do not have the funds needed to buy the house of their choice.
Thankfully, Singapore’s social security net also covers properties and there are plenty of schemes where you can get a loan to make a downpayment on the house you want to buy. Here are some ways you can easily finance your home purchase in Singapore:
Home Loans from Private Financial Institutions
One of the most common ways to finance a home purchase in Singapore is through a home loan. A home loan is a type of loan provided by banks and financial institutions that allows you to borrow money to purchase a property. You will need to pay back the loan over a set period, typically 25-30 years.
When applying for a home loan, you will need to provide various documents and meet certain eligibility criteria. This may include proof of income, employment history, credit history, and more. The interest rate and repayment terms will depend on the lender and the specific loan product. Choosing the correct lender is half the battle won if you decide to go this route. When looking at home loans, it is important to carefully consider the interest rate and the terms of repayment to ensure you don’t end up in a debt trap.
Central Provident Fund Savings
The Central Provident Fund is a mandatory savings program in Singapore. This fund was introduced by the government to help citizens save up for retirement, healthcare, education, and other major expenses. The savings in the fund are accumulated by having a portion of every resident’s salary put away. You can use your Central Provident Fund savings to pay for the downpayment and monthly mortgage payments on your home loan. The amount you can withdraw will depend on several factors, including your age, the value of your property, and your available Central Provident Fund balance.
However, it is important to realize that the Central Provident Fund was not primarily made for financing properties, and once you sell the property, you will have to pay back the funds from your Central Provident Fund , plus the accrued interest. Therefore, if you are using funds from your Central Provident Fund to finance your property, you should always keep in mind the interest you will have to pay later if you sell the property.
Private Loans
In some cases, you may consider using a private loan to finance your home purchase. Private loans may be unsecured loans or secured loans which require collaterals, such as your property. However, private loans typically have higher interest rates compared to home loans, and the repayment period may be shorter. Private loans may be suitable if you need a sum of money quickly for a short duration.
These are the three primary ways you can finance your home purchase and secure a loan on suitable terms to buy an affordable home in Singapore. Each method has its merits and demerits and their suitability for you depends on your personal financial situation. It is, therefore, crucial to understand the terms and conditions of each option before coming to a decision.
How to Save Up to Secure a Home Loan in Singapore
If you intend to finance your dream home in Singapore through the three ways mentioned above, you still require a sizable amount in your bank for the down payment and be able to pay down the loan through monthly instalments on top of your regular living expenses.
Securing a home loan in Singapore can be challenging, especially for first-time homebuyers who are not familiar with the process. Here are a few tips on how you can maintain your budget and save up to secure the loan you want for your dream home:
Understand The Amount of Money Needed
Before you start saving, it’s essential to understand the costs associated with purchasing a home in Singapore. Apart from the purchase price, there are other costs that you need to take into account, such as legal fees, stamp duties, and renovation costs. Legal fees can range from $2,000 to $3,000 or more, while stamp duties can be as high as 6% of the purchase price for properties above $1.5 million if you are a Singapore citizen and it is your first residential property purchased. Renovation costs can vary widely, depending on the type and size of the property as well as the extent of the renovation. By understanding these costs, you can estimate how much you need to save to secure a home loan.
Ensure Your Current Debt is Low
One of the most important things you can do before applying for a home loan is to ensure that your current debt and loans are low. When you apply for a home loan, you are subject to Total Debt Servicing Ratio. Under Total Debt Servicing Ratio, the debt ratio of your monthly income is capped at 55%. Therefore, if you already have high debt, the home loan amount you can get would be low.
Therefore, you need to take concrete steps to keep your debt low to secure the home loan you require. Some ways you can keep your debt in check are by not buying a car before you buy a home, paying off credit card bills on time, and avoiding any high-interest-rate debt. Your credit score is highly important in securing a loan. A low credit score means you may not get the required amount you want.
Secure a Home Loan in Singapore from ValueMax with Ease
Securing a home loan in Singapore is no easy feat, especially if you need to meet strict conditions in order for a loan to be approved. While the Central Provident Fund is a good option to choose from, your loan will depend entirely on the balance in your fund. In some cases, people may find themselves completely not meeting the requirements for a home loan after putting a deposit downpayment on the house they want.
In such a scenario, your best bet is ValueMax – an alternative financial services provider in Singapore that provides easy-to-secure mortgage loans. ValueMax requires simplier documentation, has flexible terms for the loan, and looks at real estate as the basis of approval. ValueMax mortgage loans also eliminates the most frustrating part of loan approval, which is the time taken in the entire process. ValueMax approves loans within a week, and the disbursement can also be done within a week of the approval for unencumbered properties. It is, however, important to know that ValueMax does not provide loans for Housing and Development Board flats.
Therefore, if you want to buy a house in Singapore without jumping through all the hoops, ValueMax is your best option. The company provides complex loan structures and accepts different types of private residential and commercial property collaterals, up to 15-year-long loan tenures, and no hidden fees or charges. ValueMax is your best bet.
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