You probably already know this, but property is expensive in Singapore. Homes can cost anywhere from hundreds of thousands for HDB flats to millions of dollars for private condos and landed homes. So for many of us, buying a home is our biggest single expense and our home loan (or mortgage) repayments the biggest liability in our lives.
Let’s not talk about the Crazy Rich Asians. Say you’re an Average Joe: Even if you buy a modest under-500k HDB flat - assuming you take 75% to 90% in home loans to finance it - you’re looking at mortgage repayments of at least $1,200 each month (depending on the interest rate and tenure). Considering the median salary of Singaporeans is $4,563 (Ministry of Manpower, 2019), that’s about a quarter of our monthly income!
Most of us take decades to pay off this debt, but not Clara Lim, 34, and her husband, Jon Phay, 37. Yes, it’s not uncommon to hear of couples who pay off their homes by their mid-thirties, but what’s interesting is that unlike couples who marry early in their twenties and live frugally for the next 10 years, Clara and Jon actually only tied the knot and bought their Bishan HDB flat two years ago.
So how did the couple manage this feat at such a young age? After all, Clara and Jon both hold pretty average-earning jobs as a writer and engineer respectively.
Well, first of all, Clara and Jon most definitely didn’t save hundreds of thousands in two years. The saving up took place before they bought the property.
In fact, with their savings combined, they actually had just about enough to pay for their $468,000 resale flat in full at the point of purchase. They only took up a home loan because Jon wanted to utilise his CPF funds while he continued working.
Clara’s savings: $120,000
Jon’s savings: $80,000
Combined CPF OA: $191,000
CPF housing grants: $70,000
Given this, you’d expect that the couple must have spent their entire twenties staying home and eating cup noodles, but that was not the case.
“Frankly, I don’t think Jon put that much effort into saving up that $80,000. He just doesn’t have expensive hobbies,” says Clara. For her, however, it was a different story: “For most of my twenties, I spent all my money on going out with friends, drinking, shopping, etc. But when I was 29 years old, a bad breakup caused me to go on a big lifestyle detox.”
Saving $120k after a bad breakup
Clara changed her job, changed her mobile number, and as far as her friends were concerned, fell off the face of the earth.
For a year or so, she went home straight after work every day. She turned to solitary (and free) hobbies like exercising at the company gym, reading library books, hiking and cycling.
Even after she had healed and was able to socialise and date again, those frugal habits still persisted.
“Without really planning to, I had saved a ton of money. I earned about $60,000 a year, and saved about 80% to 90% of my take-home pay. After about three years, I had saved up about $120,000 in cash,” she shares.
Debt-free in 24 months
As mentioned earlier, Clara and Jon took a small home loan to keep aside some cash savings and utilise the CPF they were earning.
“Although we could have paid off the entire flat in cash and CPF, Jon suggested we take a housing loan because he wanted to utilise his CPF contributions while he continues working.
I, on the other hand, did not want too much financial commitment,” says Clara.
In the end, they compromised on a $53,000 loan for two years, which seemed like an acceptable commitment period to Clara. The amount is too small for a bank loan, so they went for an HDB loan. Here’s the breakdown:
Flat price: $468,000
Down payment: $261,000 in CPF (including grant) + $149,000 in cash
Deposit: $5,000 in cash
HDB home loan: $53,000 at 2.6% p.a. for two years
Monthly repayments: $2,276 using CPF
Wah how come their flat looks so shitty on the inside?
These two are most likely the ultra kiam siap type, probably didn't even bother to renovate the house so as to save on furnishing costs altogether.
I can smell this is some blatant advertising bullcrap by property guru from a mile away.
Misleading article. They didn't pay for their flat in merely two years. They saved till they reached their mid-30s before proceeding with the property purchase, subsequently using another 2 years to clear the outstanding loan amount.
Regardless they cleared their housing debt early on, and are definitely in a better position than most couples who struggle with their mortgages for decades.
Some rethink BTO plans, current living arrangements
First apply for a Build-To-Order (BTO) flat, then have a wedding three to four years later.
Such is the plan - one might even call it a template - for so many young Singaporean couples that the pragmatism has passed into urban legend here.
But in a time of Covid-19, the "BTO first, marriage later" path in life has come under strain.
In the August sales exercise of these flats, which are available to Singaporeans who do not own any other property, the expected completion date of some BTO projects was pushed back to four to five years, instead of the usual three to four.
For content creator Charlotte Wang, 27, and her boyfriend of two years, Mr Matthew Lee, the longer wait for a BTO flat means they would have to either live with their parents or rent a flat - neither of which appeals to them.
On top of that, Ms Wang quit her role at a marketing agency at the beginning of the year to take a two-month break, which then turned into a period of extended unemployment when she could not find a new job.
Mr Lee, also 27, who works as a financial consultant, saw his income dip as well.
The couple are now forsaking their BTO plans and thinking of buying a resale flat next year.
Says Ms Wang: "The pandemic made things a little uncertain for us financially. So we agreed we would save up for a year and, hopefully, by the end of next year, we will be able to afford a resale flat and a small wedding."
Their target is to save $100,000.
"My own spending has gone down significantly as I'm fixated on saving up for bigger things such as the house," she says, noting that she now puts aside about 75 per cent of her income, compared with 50 per cent in the past.
Several other young Singaporeans interviewed by The Straits Times expressed similar concerns about the long waiting time for a flat, as well as their ability to pay for one.
Ms Christine Sun, head of research and consultancy at real estate agency OrangeTee & Tie, says the reluctance to wait - for those who can afford it - could have fuelled the recent spike in demand for resale flats.
She adds: "Many BTO launches were also heavily oversubscribed, and unsuccessful candidates may have bought resale flats as an alternative."
Data from the Housing Board (HDB) showed a total of 7,787 HDB resale flats were sold in the third quarter of this year, compared with 3,426 in the second quarter. This is a 127.3 per cent quarter-on-quarter increase.
Prices of HDB resale flats also rose by 1.5 per cent across the board in the third quarter, compared with the previous quarter.
Dr Sing Tien Foo, director of the Institute of Real Estate and Urban Studies at the National University of Singapore (NUS), says the pandemic may have led some young people to rethink their finances and adjust their spending and saving habits so that they can buy a home.
This is particularly true if they do not want to wait for a BTO flat and are thinking of a resale flat, which may continue to increase in price, he adds.
Dr Sing notes that there is also the added worry of not being able to find a full-time job with steady Central Provident Fund contributions, which may affect their ability to afford the flat.
Still, experts feel that the demand for a BTO flat before marriage is a cultural norm that is not likely to change any time soon for the majority of young Singaporeans, even in a post-Covid-19 world.
But, says Assistant Professor Jeffrey Chan, from the Singapore University of Technology and Design's humanities, arts and social sciences faculty, they may have to make adjustments and adapt to situations such as a longer waiting time.
Temporary arrangements could include taking short-term rental or delaying marriage, says Prof Chan.
A recent survey commissioned by the National Population and Talent Division and the Ministry of Social and Family Development found about 30 per cent of respondents said they were likely to delay marriage or have a child later because of the Covid-19 pandemic and its effects on the economy.
The survey polled about 4,100 Singaporeans, of whom about half were aged 22 to 32 and in serious relationships, while the rest were married individuals aged 21 to 45.
The pandemic has also caused others to rethink their current living arrangements.
A week into the circuit breaker in April, 19-year-old Zoey (not her real name) decided to start saving up for her long-time goal of moving out of her family home.
The experience of being cooped up at home with her parents and younger brother in what she described as an "unconducive living and studying environment" spurred the second-year polytechnic student into action. She currently has a "couple of thousands" stored away for future rent.
"I had thought about moving out since I was 13 but it was not possible, so I stuck it out. But now that I'm older, I can work towards this goal by saving more and working part time," says Zoey, who declined to be named for fear of her parents finding out.
She acknowledges that it may be one or two years until she can realistically move out, and even then, she may have to "live uncomfortably", such as in a backpacker hostel. But she does not mind.
However, Adjunct Associate Professor Steven Choo, from the department of real estate in NUS, says many young Singaporeans are typically "quite pragmatic" and are unlikely to move out of their parents' house if they do not have the financial capacity to sustain themselves in the long term.
"The last thing you want is to have to move back home when you run out of money. Usually it's the more enterprising ones who will take the opportunity to get out of their homes," says Prof Choo.
More at https://www.straitstimes.com/singapore/housing/some-rethink-bto-plans-current-living-arrangements
Woah the writer of the article Michelle Ng looks quite fappable!
@Ah Sam Boi Boi She quit her job just to take a two month hiatus - YOLO much Ms Wang?