Can your child afford a home in Singapore in 2030 ?




New private homes to cost $2900 psf in 2030


Recently, I had come across this article on Today. It stated that if all things go accordingly, Singapore property price will rise in the future. It set alarm bells in the head as I pondered if my children would be able to afford to have a house in their future.

LET'S BREAK IT DOWN

In the article, it was written that new private houses may cost $2900 psf. In addition, the average size of the house will shrink to an average 840 sq feet. If you compared it to current HDB sizes, it will be smaller than the current 4 bedroom that has an average of 900 sq feet.

At 2900 psf and 840 sq feet, each private house may cost a whopping 2.43 M

CAN YOUR CHILD AFFORD IT?

Cost of House :  $2 430 000
Downpayment : $ 486 000
Loan Size : 1 944 000
Monthly interest (assume 2.5% at 30 years) $7588

Base on TDSR 60% , the couple taking a loan would have to earn $12646 per month

There are a few other cost to consider.
Stamp Duty : 81 840
Renovation : 50 000
Additional cash : 13840

This means that a couple need to save a whopping 500 000 ( Down payment + Stamp Duty + Renovation) before they can even head to the showroom to purchase an average size private home.

To save 500 000 in cash  would probably mean you need to work for about 10 years or more base on an average salary of 100 000 per annual.


IS IT REALISTIC?

Base on the above calculation, unless wages chases up to inflation, buying a private home in the future would be more of a dream than a reality.

To put things in perspective. A family unit earning 100 000 per year would take 25 years just to pay off the principal of the house. Add interest and other expenses for the family. It could take as much as 50 years. That means your grandchildren might end up paying for the house!

A single income would be unrealistic in the future if this is the case. Time to start planning...

So what options do you have in this case?

1) Buy a Public House
A more realistic way to afford a home is to purchase a HDB. With inflation taken into consideration, a brand new 4 room HDB might cost about $600 000 in 2030 . Compared to private house that cost 4 times more, it will be much more affordable especially with grants and subsidies

The downside - You are buying a leasehold property , so technically it is a rental, not an investment for the future
The upside - Affordable option , still can be use dfor retirement planning but not for the next generation.


2) Buy a house now for the child 
Forward thinking parents would consider purchasing a family property for the child if they can afford it in today's terms. They can consider renting out the house to offset the monthly payments before handing the keys over to the child.

The downside - You need to have a decent size fund to do so plus the house would be deem 'old' in 2030.

The upside - Rental income and  en bloc potential

3) Rent in the future
With houses at skyrocket prices, renting a private home may make more economic sense than purchasing one.

The downside - You do not have a retirement asset

The upside - You can change house every 2 years!

4) Stay with the Parents
In future with high property prices, children may stay with Parents even after marriage. That way, they can save on insane pricing.

The downside - You do not have a place of your own

The upside - Parents can double up as 'nannies' for your children ( not an upside for parents though)

BOTTOMLINE
So can your child afford the private house in the future?

It really depends on what Singapore will be like in 2030 .
Will there be a population explosion to 6.9 Million by 2030?
Will wages grow accordingly to inflation?
What career path would your child take?

Taking Hong Kong as an example. Housing , especially Private Housing may become a cost issue to the masses in the future. Till then, can you still find your spot in this tiny red dot?



1 comment:

  1. If you really want your own appartment, a option is to stay with your parents and earn as much money as possible to buy.

    ReplyDelete

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