What to do for housing if you never intend to get married in Singapore

CONTEXT FOR OUR INTERNATIONAL FRIENDS: Singapore is a small country with limited land, as a result, young locals that want to apply for government subsidised housing will need to either be married or wait till they are 35-years-old.

This makes it tricky for young Singaporeans who aren’t married to get affordable housing (because private housing is expensive in land-scarce Singapore).

When it comes to affordable housing in Singapore, those who don’t intend to get married will find it challenging. In case we aren’t clear: We’re talking same-sex couples, non-traditional families or people who have chosen to stay forever alone.

It somewhat gets better when you hit 35, when you get to own your home under the Singapore Citizen Singles Scheme, or the Joint Singles Scheme.

If you’re before 35, though, the only way of getting a HDB flat will require some sort of tragedy to occur. More specifically, either the death of your parents under the Orphans Scheme, or if you get divorced/or widowed with a child under the Public Scheme.

Oof.

With that in mind, we’ve written this article to help you take a look at the options available while you’re waiting for a HDB flat at 35 years old.

In summary, the housing options for singles looks like this:

• Live with your parents (free)
• Buy private
• Rent
• Buy HDB (only unlocked at 35)

Live with your parents

There’s a good reason why living with your parents is the default choice for most Singaporeans.

You get to save on rent, bypass the financial risks of owning private property, and sometimes get a free meal or two.

Do note we say this without any sarcasm at all – even Americans, famed for moving out at a young age to pursue independence, are moving back to their parents’ place in their 20s.

Unfortunately, not everyone has a good relationship with their parents.

Let us be damn clear about this:

No Singaporean should feel embarrassed or guilty about living with their parents till 35. Moving out often means that you will incur significant financial costs. These are not to be taken lightly, and you must be prepared to take unconventional action if you are to emerge from it financially unscathed.

So, if you have the privilege of having supportive, non-toxic parents, please, please reconsider moving out.

The private property route

There are no restrictions when it comes to private properties – you can buy them the moment you hit 21, without the need to get married or follow any HDB’s rules.

The obvious downside, of course, is price.

Condos can be up to 3-4 times pricier than the regular HDB, so you’ll get less space for your dollar.

There are also no subsidies for private property, putting this out of reach for most people in their 20s.

If you thought saving $100,000 before 30 was a big deal, expect to fork out at least $170,000 – $200,000 for the downpayment for an entry-level, one bedroom condo. 5% of the property’s total price will also have to be in cash.

Even if you try to tank the damage with a partner, it’s still a lot. Using the 3-3-5 rule, you and your partner will have to earn around $8,333 each per month to afford a $1,000,000 condo.

I’m not sure about you, but I definitely could not afford a condo in my 20s.

Couldn’t I use a condo as an investment?

One housing idea we hear a lot from our readers goes like this: Buy a condo to escape your parents, live in it till 35, then sell it for profit and get a HDB afterwards.

In theory, this is possible, but only if you purchase a condo that can actually be sold for a profit – and not all of the properties are created equal. Just like companies that you invest in, there are good condos, better condos and bad condos.

One rookie mistake that is often made by people seeking to move out is to buy the cheapest condo they can find on sites like 99.co or PropertyGuru.

The thing to note about such condos? They’re cheap for a reason.

For example: the years remaining on the lease might not be great.  Even if the condo has the much coveted freehold status, it might be in a stigmatised location. It might suffer from bad neighbours, poor design, poor reputation, etc etc.

All these factors mean that when the time comes, you are likely to have trouble selling your condo at a profit. Or worse, having no buyers, or selling at a loss.

Another thing to consider would be the lack of diversification – if you poured most of your net worth into your condo, you won’t be able to invest in anything else.

You’ll effectively be staking your entire financial future on one property. Fingers crossed!

Renting

Many people think renting is a waste of money, because they’re comparing this to buying a subsidised HDB flat.  Make no mistake, buying and living in a subsidised HDB flat and receiving government grants will always be the cheapest option. (It’s also a moot point. You’re renting precisely because you can’t buy a HDB flat.)

However, renting is generally cheaper than buying a condo to live in for the short term.

Here’s the thing you need to understand about renting in general – it’s a short term play that makes sense if you don’t mean to live in one place for a long time. The expats here understand this really well.

The reason for this is that there are many hidden costs to home ownership. Here’s an example.

If 30-year-old you went to buy an entry-level $650,000 condo to live in for five years before turning 35, and then sold it to downgrade to a HDB flat, this is what it would have roughly cost you.

	Costs
Buyer Stamp Duty (See how this is calculated here)	$14,100
Agent commission  (2%)	$13,000
Legal fees and valuation fees	$3,000
Property tax (Assuming $24,000)	$2,400 annually x 5
Condo maintenance fees ($300)	$3,600 annually  x 5
Bank Interest (1.2% interest rate) Calculator here.	$5,644 annually x 5
Opportunity cost of your downpayment (cash + cpf), based on 2.5%	$21,682
Total	$104,358

$104,358 – and that’s not taking into account stuff like reno, furnishing, as well as higher opportunity cost if you had invest in say, the stock market. 

For reference, if you had rented a place for $1,800 monthly during the same period, you would have spent roughly the same amount with far less financial risk while having flexibility, liquidity and the ability to invest your money. 

You can read more about renting vs owning here.

PS: The property agents here will say that we’re not accounting for capital appreciation. That said, we generally advocate not treating your primary residence as an investment.

How much to spend, then?

How much you spend on rent is a combination of how much rent you pay, as well as the duration.

IMO, the ideal age to rent a place in Singapore is when you are 28 – 31 years old, spending between $500- $1,800 per person monthly.

Why?

Well, for starters, we’d only rent out of necessity, not luxury. Renting in Singapore, at least – is best seen as a bridging measure, not a permanent solution.

The idea is to keep your costs below a hypothetical condo-situation buying situation, and buying a HDB when you turn 35.

$500 is the lowest you can expect to pay for a common room in a HDB flat these days (though if you share a room with someone else like many foreigners do in Singapore, it can go even lower).

On the other end of the spectrum, $1,800 should be able to get you either a studio apartment, or a master bedroom in a central part of Singapore.

Consider net worth, not just income when renting

Conventional advice suggests that you should spend no more than ⅓ of your disposable income on rent.  You should also have about six months of expenses saved up before moving out.

However, both of these don’t take into account the most important financial number – your net worth. That matters, because how much you have should impact how much you spend.

My personal guideline?

Don’t spend more than 1-5% of your net worth on rent.

Put together with the two other rules, it kinda looks like this:

Take home pay	Max you should spend on rent	Ideally, save this before you move out
$2,500	$833	$16,660
$3,000	$1,000	$20,000
$4,000	$1,333	$26,660
$4,500	$1,500	$30,000
$6,000	$2,000	$40,000

We understand that these are tough choices

In a society where most people live in subsidised public housing, there is no denying that renting a place will set you back financially.

And yes, even though some can use paying rent as a motivation to further their financial ambitions, this is not something everyone will be able to do.

We’re torn, because on one hand, we can understand the intention of the government – trying to coax us into having babies, giving priority to the traditional, child-creating families.

That said, it is worth considering that society’s idea of a ‘traditional’ family has and will continue to evolve over time, and it’s important to continuously have conversations about this.

Obviously, any change will take time, but many of us cannot afford to wait. Until then, here’s to making the best plays we can.

Stay woke, salaryman

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