Wednesday, 2 May 2012

HDB Prices: Shocking!!

"HDB too expensive!!", "30-year loan!! Pay until die!!", "Can buy, but cannot keep!!"

These are the complaints I've been hearing recently. In fact, even my teacher talks about it. And DPM Tharman's "$1000 salary can buy HDB" theory didn't really help things either. To find out if this is true, I decided to do a bit of research.

I went to propertyguru.com.sg, and searched for a 3-room flat in Jurong West to compare against the flat that i'm living in now. A 3S flat in my block sold for $250,000 in December 2010. My mom bought her 3S flat for $80,000 19 years ago. See the difference? 

To show the difference more clearly, I did some basic calculations. Here's the math: 

Less 20% cash downpayment = $200,000
Gross monthly installment = $200,000/360 months(30 years) = $555.56 (rounded off to two decimal places). 
Add 1.08% interest, and the total monthly installment will be $561.55. 

With a $800 monthly salary (after deducting CPF), a family of four (2 adults + 2 kids) is left with only $238.45 to pay for utilities, food, education, transport etc. How to survive on that, when everything's so expensive nowadays?

Ok, suppose the employee decides to pay the loan with his CPF. Here's the maths:

20% employee contribution = $200 
16% employer contribution = $160
Total monthly contribution = $360

With the contribution rate as it is, the employee's CPF will be completely wiped out (if not negative) by the end of 30 years. With a $800 salary, I doubt the employee will have any savings after 30 years, when he retires. So what will he depend on when he retires? His children? Or collecting plates at hawker centers?


p.s. The calculations may be wrong, but i'm sure that monthly installments for 3-room flats are around this level. In fact, when I looked at a 4NG flat located in Pasir Ris One, propertyguru's mortgage calculator showed a monthly installment of $1,433!!