When I was asked this question, I gave the most accurate answer possible, which is “too much”. However, in the interest of ensuring our Single Digit Millionaire readers are well prepared – and not at all because Google requires several thousand words for this to appear on their search engine – I’ve decided to drill deeper and be more specific. So if you want to buy a condo in Singapore, here’s what you need to have prepared:
Buying a new launch condo
Is your housing situation best described as “I hate having money?” Then a new launch condo is the way to go. Although it’s shiny and new, bear in mind that new launch condos are always priced higher than resale condos (it’s the opposite of HDB flats, where resale is usually cheaper than BTO).
This is the price of new launch condos over the course of the past year. Look at that, it’s insane. The average price as of January 2024 is $2,463 psf, up from $2,185 psf over the course of a single year.
A 1,000 sq. ft. new launch condo, which is about right for a family, is going to be around $2.4 million. A one-bedder condo unit at 500 sq. ft., which is about right for a badly stunted hamster, is about $1.23 million.
But if you want to buy something like this, here’s the breakdown
The maximum Loan To Value (LTV) ratio the bank can give you for a residential property is 75% of the price or valuation, whichever is lower. Now for a new launch condo, the good news is that the price and valuation are always exactly the same.
So for a $2.4 million new condo, you can borrow a theoretical* maximum of $1.8 million. This leaves you with a minimal down payment of $600,000. Of this, the first 5% ($120,000) must be paid in cash, while the remaining $480,000 can be in any combination of cash and / or CPF. You can pay the whole thing in CPF if you have enough; who needs to retire anyway.
Note that none of the down payment can be covered by another loan. Under MAS notice 632, banks are legally disallowed from loaning you money for your housing down payment – and the mortgage banker is far more scared of jail than of you speaking to her manager, so don’t bother trying.
*The bank is not obliged to loan you the full 75%. I’ll cover why in another article, lest this one end up having more pages than a Tolstoy novel.
Next comes the stamp duty
If you have no other property besides the one you’re buying, you only pay the Buyers Stamp Duty (BSD). Otherwise you also pay ABSD (see below). All stamp duties are payable within two weeks of completing your property transaction.
The BSD rate is:
- 1% of the first $180,000
- 2% of the next $180,000
- 3% of the next $640,000, are you sweating yet?
- 4% of the next $500,000,
- 5% of the next $1.5 million
- 6% of any remaining amount
So for our $2.4 million condo unit, the BSD comes to $89,600. You can pay this in any combination of cash or CPF.
Note that all stamp duties, be it BSD or ABSD, is based on the higher of the price or valuation – but since this is a new launch condo, the price and valuation are considered the same; thank God for small mercies.
If you buy a condo as a second or subsequent property, you also have to pay ABSD. This is:
| Singapore Citizens | Permanent Residents | Foreigners | |
| First residential property | 0% | 5% | 60% |
| Second residential property | 20% | 30% | 60% |
| Third and subsequent residential property | 30% | 35% | 60% |
If you buy the condo before selling your previous home (e.g., you’re upgrading from a flat, but you buy the condo before you sell the flat) you’re still liable to pay ABSD, unless you’re buying an Executive Condominium (EC). Yes, I know these rules sound like 5D chess, but I didn’t make them.
Anyway, if you’re a married couple and one of you is a Singapore Citizen, you can apply for ABSD remission afterward, provided (1) you remain married when applying for remission, and (2) you sell your previous home strictly within six months of buying the new one, which is how you develop hypertension and stroke risk in just half a year.
So in all, you’ve paid $600,000 in down payment + $89,600 in stamp duties ($689,600).
Finally, you need to pay a bunch of miscellaneous costs such as the legal fees (usually $2,500 to $3,000), any processing fees for your bank loan, and insurance.
Note that only the fire insurance is mandatory; unlike an HDB property, you’re not forced to purchase mortgage insurance (this pays off your outstanding home loan in the event of death or permanent disability). So definitely skip it if you hate your family.
You also don’t have to purchase home content insurance, which compensates you for the stuff you lose during a fire, flooding, etc. So another option to skip if you hate what you own.
We can put miscellaneous fees at around $4,000, give or take, giving us around $693,600 you should have in your pocket.
Finally, let’s look at the monthly loan repayment
Note that monthly loan repayments are capped at 55% of your monthly income, inclusive of other debts. So if your combined income is $20,000, then your monthly loan repayment can’t exceed $11,000.
If you have around $3,000 in other debt obligations monthly, then your maximum loan amount falls to ($11,000 – $3,000) = $8,000 per month.
This is called the Total Debt Servicing Ratio (TDSR), and if you exceed it, you need to either clear some existing debt, stretch out the loan tenure, or make a bigger down payment.
We’ll assume a home loan interest rate of 3.5%, which is typical at the time I’m writing this, and a loan tenure of 25 years. Our total loan amount (75% of $2.4 million) comes to $1.8 million.
Now the good part about a new launch property is that you don’t pay the full loan amount from the start. You use what’s called a Progressive Payment Scheme (PPS), where the loan repayments grow as parts of the condo get completed.
The exact sequence of completion is not 100% predictable – sometimes developers may complete more than one step at once, for example. However, the monthly loan repayments may look something like this:
- $600 per month for the first six months (foundation being laid)
- $1,817 per month for the next six months (concrete structure being laid)
- $2,429 per month for the next three months (walls put in place)
- $3,044 per month for the next three months (roofing work)
- $3,660 per month for the next three months (electrical work and plumbing)
- $4,279 per month for the next three months (drainage works, roads)
- $7,435 per month after receiving the Temporary Occupancy Permit (TOP), which may last about a year
- Full loan repayment of $9,537 per month from that point on, after receiving the Certificate of Statutory Completion (CSC).
What about buying a resale condo?
While it’s broadly similar, there are a few key points of difference.
For starters, prices are less insane, and don’t resemble the GDP of a small country. Prices averaged $1,508 psf at the start of last year, and currently average $1,609 psf. So a 1,000 sq.ft. resale condo unit, for a family, would be about $1.6 million. Yes, the price gap is that huge.
For down payments and stamp duties, there may be a discrepancy between the selling price and valuation.
For our example, let’s say the valuation is $1.6 million, but the seller wants $1.7 million. This is $100,000 over the actual valuation.
Now the mortgage covers only the lower of the price or valuation – so you can borrow up to (75% of 1.6 million) = $1.2 million. This leaves you with a downpayment of $400,000, plus the extra $100,000 above valuation.
To clarify, that’s:
- $80,000 in cash
- $100,000 in cash above valuation
- $320,000 in any combination of cash and / or CPF
Next, the BSD, which is based on the higher of the price or valuation. So in this case, the BSD is based on $1.7 million, which comes to $54,600.
Finally, for the loan calculation, the full monthly repayments kick in all at once
Given a loan amount of $1.2 million, at 3.5% over 25 years, this comes to about $6,000 per month (the TDSR still applies as normal).
Costs of legal fees, insurance, and other miscellaneous fees are the same for both new and resale properties.
Can you actually afford this?
As a rule of thumb, the property should not cost more than:
- Five times your annual combined income
- 30% of your combined monthly income in loan repayments (regardless of whether the TDSR allows for more)
It’s also a good idea to have about 30% of the total costs needed, before attempting to buy the property. I’d also suggest you aggressively pay down any outstanding debts, 12 months before applying for a mortgage; this will reduce the risks of busting the TDSR limit.
This isn’t the be-all and end-all of buying a condo, as you also need to factor in costs like renovations, furnishing, maintenance fees, property taxes, and the complex nature of home loans (which have fluctuating interest rates, so you can never be sure how much you’re paying after interest over 20+ years).
If you do need help, seek specific help for the home you’re purchasing. Reach out to Single Digit Millionaire with your questions and we’ll find out what you need.
