An American told me that 30 years ago, the banks will give a mortgage to the borrower to buy a house for not more 3 years of the income of the breadwinner (and the income of the working spouse is disregarded). The bank also required the borrower to make a down-payment of 10% for the house.
If this rule is applied in Singapore today, the average price of a 4 room HDB flat should be $120,000 (assuming an average income of the breadwinner to be $40,000).
The price of HDB flat that is being charged is about 3 times of this benchmark - and a 4 room HDB flat is considered to be quite modest, compared to a typical house with a land in America. (See http://en.wikipedia.org/wiki/Public_housing_in_Singapore)
This shows how costly are HDB flats in Singapore - and they are considered as "public housing". No wonder, both parents have to work and they still do not have enough money for retirement. The housing is far too expensive.
This is call "putting spurs on your back", so that Singaporeans cannot be slack. Yah I know, disgusting.
ReplyDeleteFor a married young couple, the smart thing to do is to buy a flat which they can comfortably pay off in 10 years. Take public transport. Buy only term insurance, invest the rest wisely in a index ETF. Aim for a cash rich, asset poor retirement. Keep it simple, but it is the simple thin that is hard to do. Thank you Mr. Tan. Cheers.
ReplyDeleteIn the past, I advise people to use the benchmark of 5 years of the family income to determine the top amount to pay for a property. I have now decided to use a single income, i.e. to ignore the income of the spose.
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