The case for buying the most affordable home you can 



My co-founder bought a 3-room resale flat in a mature estate last year for a tidy $430,000 in Marine Parade (before the various CPF Housing Grants).

Personally, I think this is a pretty smart decision, given his income and lifestyle. A 3-room flat (or 4 room) flat also makes more sense compared to a 5-room flat, because: 

  • Less rooms to clean  
  • Less money spent on renovation 
  • Lesser need for so many rooms anyway, if you’re not intending to have kids

That said, conventional home owner wisdom is to buy the biggest or the most expensive HDB flat based on your budget. I know couples who don’t earn that much but are considering going all out for HDB flats in locations like Boon Keng, where the resale prices could be as high as $900,000.


Today I’d like to present another argument: why you should buy the most affordable flat you can. 

Now, I’m going to qualify some stuff upfront. 

What we mean specifically is to ‘buy the most affordable flat that meets your needs, not ‘buy the absolutely cheapest flat.’  

There is a difference. 

Avoid the ‘asset rich, cash poor’ trap that many people fall into

HDB_AffordestHDB_002To many traditional Singaporeans, this is the idea of being rich: Own lots of expensive things and live in a big house. This mindset is a key ingredient for a lifetime of debt.

But consider this other definition of being rich: Having enough money and freedom for many experiences – cycling around the world, starting a business, supporting causes you’re passionate about, spending more time with your ageing parents and young children. 

We think, in the 21st century, the real marker of wealth is time, mobility and options.

All three cannot be achieved if you’re bogged-down paying for an expensive flat way beyond your means. 

BUT, they can be achieved if you work on your investments. Which brings us to our next point. 

Buying a home beyond your means will limit your investment potential HDB_AffordestHDB_003

Okay let’s get one thing clear. 

There are generally two types of residential property in this world – property you live in, and property you invest in. 

  • The first one is where you just live in and don’t make money from. This is your *home*. Even when you sell your home to get cash, chances are you’ll use this cash to buy another home. 
  • The second is one you try to make money from. This is called an investment.

    Sometimes, these two categories overlap. HDB flats, which are meant to be affordable public housing for homeownership, typically fall in  the first category (more on this later). 

HDB_AffordestHDB_007The more money spent on your home, the less money you have for investments (investment property, stocks, bonds, etc). Now, this sounds ridiculously simple, but many will find this hard to understand. 

Simplified even further, it looks like this: 

  • You want to retire earlier: spend below your means on your home, spend more on investments.
  • You want to retire at 62 like everyone else: spend within your means on your home, invest as per normal.
  • You want to have insufficient retirement funds: spend beyond your means on a home, don’t invest.

Here’s some boring math to drive the point home (pun intended). STAY WITH ME. 

Let’s assume you buy an HDB flat and stretch payments across 30 years, at an interest rate of 1.7% p.a. These are what your mortgage payments will look like. 

Property price Monthly repayment, assuming 1.7% p.a over 30 years
$400,000 $1,419
$600,000 $2,129
$800,000 $2,838

If you had picked the $400,000 flat over the $600,000 one, you would have $710 more each month for your savings or investment.

This doesn’t seem like much, but let’s look at the opportunity cost of investing the $710 over 30 years. 

Place Interest rate Opportunity cost of having $710 invested over 30 years
Under your mattress/ In a biscuit tin

(TWS does not recommend this investment vehicle)
0% $255,600
CPF SA 4% $486,542
Stock Market (conservative)  5% $578,916.
Stock market 


7% $830,311

Now, I want to be very clear. We’re not saying that buying a $600,000 or $800,000 flat is a financial disaster.

If your combined household income is like $20,000, go ahead. You can buy pretty much any HDB flat you want and have enough left over to work towards your financial freedom. 

But if you and your spouse are the median Singaporean couple earning about the median household income of $9,425, you need to be more cautious. 

Which brings us to this. 

What’s ‘too much’ to spend on a flat? 

HDB_AffordestHDB_004To avoid spending too much on a flat, you must know what is too much. Here are two methods you might find useful to judge whether your flat is too ex. 

The first is the 3-3-5 rule, popularised by property blogger Property Soul and often criticised for being too conservative. 

Following the ‘3-3-5’ means you meet all of the following criteria: 

  • You should have 30% of your capital ready before you purchase your property
  • Your monthly repayments should not be more than ⅓ of your monthly income 
  • And the property price should not exceed your annual income by 5x 

Our suggestion is to use the last rule and then work backwards. It looks like this: 

Your household income The max price of a flat you should buy  Save this amount before buying Your max monthly payments 
$9,425 (median income in 2019) $565,600 $169,650 $3,141
$14,000 (income ceiling for BTO)  $840,000 $252,000 $4,666
$16,000 (income ceiling for EC) $960,000 $288,000 $5,333

Criticism for 3-3-5

Now, a lot of people find this rule very limiting. “iF i foLlOw ThiS I cAnNoT afFoRd anYthIng,” they say. 

My opinion is that the rule is a good rule of thumb, and perhaps their tastes in properties are too exquisite or aspirational. 

That said, different strokes for different folks. We’re a page focused on savvy financial decisions, not living in luxury or impressing people. So, use your own judgement. 

The second rule we’ve created is a simple one called “follow the crowd”

HDB_AffordestHDB_005It follows the same logic you used in secondary school to find out whether you’re keeping up with the syllabus.

If you’re the only one failing a test, you should be worried. But if everybody failed a paper, you’d be relatively safe. 

(We’ve lumped all 3, 4, and 5 room flats in the same category because it’s very possible for small families to overextend themselves to buy a 5-room flat when a 3-room would have sufficed.)

Which brings us to this magical number: The average price of all  3-, 4- and 5- room resale flats in 2020 is $430,000 (rounded down from $433,363). Typically BTO flats are cheaper, because they’re subsidised by HDB.

$430,000 isn’t a number we pulled out from nowhere, I’ve used paid software from 99.co (where I work) to generate this chart – it gets data from URA, REALIS and of course, 99.co. 

At the same time, the median household income is $9,425. 

If you spent more than $430,000 on your flat, but are earning below the median income, then you should be clear that you’re spending beyond the norm. 

Same if you’re earning the median income but spent significantly more than $430,000.

Like the 3-3-5 rule, this isn’t something you need to follow religiously, but more of something to build self-awareness. 

You’re not doomed if you ‘overspent’. But you need to recognise that you’ve spent beyond the average amount – and then work to make up for it somewhere. 

If you find all these rules restrictive, you can check out HDB’s financial planning tools to help you draw your own conclusions instead. 
They also have their own useful guidelines to help you make your decision. 

Of course, buying a flat is not all about money HDB_AffordestHDB_006

You know what? We get it. We actually do. Money isn’t everything. Buying and owning a flat is a rite of passage, and it’s often an emotional decision. A home has feelings attached to it – feelings of belonging, love, and hope. 

What’s right for you? 

We are not you, so we honestly don’t know. 

What can be said is this: According to the Pareto principle, 80% of life’s outcomes are caused by the 20% of inputs. To simplify, 20% of your choices in life will affect 80% of your life.

Your first flat that you buy in the prime of your youth? 

It’s definitely in that 20%. 

Stay woke, Salaryman.  

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17 replies to “The case for buying the most affordable home you can 

  1. Can intro me some stocks that projected 5% p.a. increments? Hopefully the uncertainty of the increments are as low as possible?

  2. Just a thought, The fear for most hdb owner is that the lease years drop below a certain years and they may face difficulty to sell or relocate due to several reasons (move near to parent, move near to kid school, move near to new workplace, move to a newer hdb unit, etc).
    Therefore some may want to stay in a more “popular area” in order for easier to sell and purchase another newer unit.
    From just married to retirement, one may need to stay in 2 or 3 different home.

  3. Personally, I’ve seen some friends who buys 3 or 4 room resale flats as their first home and struggle to make ends meet. However, I also have many friends who buys 5-room BTO in non-mature estates (cheaper so they go all out) as their first home and also, struggling financially. They did not think it through, IMO.

    So, all in all, it comes down to affordability as stated in this article and I appreciate this post as a guide for us as it helped us make a decision on finally trying to apply for a 3-room BTO (hopefully, we can get it 🤞🏼).

    Of course, there will be people or friends (like the ones above) who will be like why not buy resale or why not buy the 5-room BTO (we may be able to afford it but why should we listen to them, right?). I will probably just send them a link to this article if they are nagging too much. 😏

    At the end of the day, like what the article said “What’s right for you?” and that is what is right for us.

    Thanks for writing this. 😊

  4. LOL, if $600k HDB can only be afforded by a combine medium income of $20k, many Singaporean are out of scope already. Do you know how many of us fall into that bracket? Maybe you can look at Singapore statistic. However, I’m not laughing at your justification, but sad to see that many Singaporean can’t afford a decent home. Based on your explanation and the income proposition in Singapore, HDB are overpricing the BTOs. On the other hand, I do see people profiting from buying the right BTO location. Such as Pinnacle.

    1. Sigh .. much agree ! As a single .. I m struggling to buy a house .. I think this saying is coming true . In my parents time one generation pay off one house and handful of kids all completed education Secondary or tertiary . In my generation one generation can’t afford a home much less a family of kids . Parents and affording myself already just make ends meet.
      Just want to get a bto, checked only 30% chance and 5 to 2.5% chance to Secure BTO and Sale of Balance. Want to buy resale near parents , Low availability and price so high 300-330k for 2 or 3 room north side. Better Idea just save money for travelling around .oh cannot travel Cos now got covid. Just live with parents and bring them out within sg. Thank God I hv no kids

    2. Im not sure where you get your numbers.
      The article clearly mentioned a combined median salary of 9,425 can afford up to 565k HDB, and combined median salary of 16k can afford up to nearly 1mil HDB.

  5. With the current EC income limit, the maximum flat price should not be more than 960,000. But it seems now the figure is the starting price. Ah well…

  6. Buy within yur means huh.
    Then don’t put a salary cap on couples who want to buy 3 room flats. Currently it is 6k I think. Previously 3k. Reasons such as to allow ppl who needs it get it. So saying that 7k income don’t needs it? But At 7k couple income it is below the median salary and thus should not buy 430k flat. And 3 room is out of bound.

    If really wants to help citizens. Why makes it so hard to make capital repayments. From previously last time minimum $500 or $1k to now $5k minimally and then each increment is $1k.
    Gives the impression if can, let citizens pay more in interests.

  7. I earn well so that cut me off from the eligibility of buying EC. However, I will break all the rules of thumb if I commit to a private property that has the equivalent size. I am stuck with my first flat which every window face a neighbours. I am frustrated!

    1. Considering that property prices are rising so much faster than incomes, give it several years and the median income family will likely not be able to fulfill the 5x rule for hdbs.

      Also, people who just exceed the 14k income ceiling are in fact in a situation of “iF i foLlOw ThiS I cAnNoT afFoRd anYthIng” which you simply dismiss.
      ECs and private clearly exceed the 5x amount. So called middle class people are simply not allowed to have houses yeah?

  8. Sorry I posted a reply to the wrong post

    Considering that property prices are rising so much faster than incomes, give it several years and the median income family will likely not be able to fulfill the 5x rule for hdbs.

    Also, people who just exceed the 14k income ceiling are in fact in a situation of “iF i foLlOw ThiS I cAnNoT afFoRd anYthIng” which you simply dismiss.
    ECs and private clearly exceed the 5x amount. So called middle class people are simply not allowed to have houses yeah?

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