Now, let’s say we have this scenario. A young couple in their mid-twenties is going to get married. They are really struggling, thinking whether should they save up to buy a new launch private condominium or should they go ahead and buy either a resale HDB or should they go for a BTO HDB. If you are in the same situation, read on as this article will help you a understand the various options available and shed some light into our perspectives.
Whilst considering the different options, we need to balance different areas of our life, our career and work and business. Our family, in terms of your spouse and kids, also got to look out for our parents and you got to plan for your property purchase or investment, for your own stay and future. And perhaps in future, you might want to buy one property for rental investment as well. So you’ve got different areas of life that you need to take care of. And of course, you’ve got to take care of your health as well, right?
I would think if you’re in that situation, then the very first question is what would then be your priority? Let’s look at the first one. If you were to buy a private resale or a new launch property, let’s take into consideration the current cooling measures. To qualify to buy a $1 million property, you need $270,000, because 25% is the down payment of which 5% is cash, 20% is CPF, to form up the 25% to buy a $1 million home, and you need to have the Buyer’s Stamp Duty as well. You can easily use this formula, 4% of $1million minus $15,400 that will bring you to about $270,000. So ask yourself, right now do you and your spouse or your partner have about $270,000 to put as a down payment? And the second thing is, can your current salary & financial position support the loan in terms of a Total Debt Servicing Ratio(TDSR) needs as well.
If you have that, then, of course, you have a good head start and you might want to consider going for that route if you think that that route will bring you at a potential gain in terms of your property appreciation in future. Of course, if you were to decide on the new launch, then from now until 3 to 4 years later, where will you live? Are you going to stay with your parents? Are you going to stay with your in-laws? So, you’ve got to make the judgment call.
But even, if you do not have $270,000 and your pay scale cannot get the kind of loan, then let’s look at the HDB option. So, if you do get a resale HDB, are you able to buy right now based on your current CPF, your CPF OA savings?
If you purchase a resale HDB as a first-timer, there are various Housing/CPF grants up to 60, 70, 80,000 grant or more depending on both your combined income and various scenarios such as living within 4 km proximity to your parents/in-laws. If you are to go in the HDB resale market, probably you can get anything from $300,000, $400,000 or even 200 over thousand for a three-room flat or four or five-room flat depending on the location, age and tenure of the property.
So if you have just gotten married and need a roof over your head to build your family, you want to buy a resale flat first because it will then allow you to get your keys within 3-4 months. You can start family planning, settle down with your spouse and focus on your career. In any case, if you were to wait to save up $270,000, let’s say to buy that private condominium, maybe let’s say you need 4 to 5 years to store up, but over here, if it allows you to actually buy a resale HDB first, and in five years time when you fulfil your 5-year Minimum Occupation Period(MOP), you can then plan to sell and buy the condo or you can keep and buy another condo. Of course, you have to pay ABSD. So I think the fundamental factor is the time issue.
What are the time and opportunity costs? And to balance whether you want to settle down to give your family a place to call home, versus waiting to store up the $270,000 to buy a $1 million home.
So I think you’ve got to balance those various aspects. And of course for BTO as well, when it reaches the five years MOP mark, there’ll be potential to have that kind of margin gain, because the flat is new. But of course, that would then take you approximately eight years as well. So three years waiting period, five years to stay. And during those three years, are you going to stay with your parents or in-laws? So the same balancing question about where you’re going to stay after you get married. Do you want to have a roof over your head immediately? So you got to judge for yourself. I hope that this pendulum will probably weigh in on all these factors that we just talked about. And of course, at the centre of these considerations would be time and opportunity cost being the main fundamental consideration point.
We hope this was helpful.
See you soon.
