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.
3 comments:
This is call "putting spurs on your back", so that Singaporeans cannot be slack. Yah I know, disgusting.
For 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.
In 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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