Asked by Anonymous

Both my girlfriend and I are earning about mid $3000 a month. Would it be a stretch to go for an EA or EC? Or should we stick to a BTO, then upgrade later?

Just wondering if I should just BTO for a 4/5 room flat first then invest my money

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  • Nicholas Woon
    Nicholas Woon, Marketing Director at ERA Realty Network Pte Ltd
    19 Answers, 42 Upvotes
    Answered on 25 Sep 2018

    Hi,

    Short Answer

    I would recommend you to stick to BTO and upgrade later!

    Long Answer

    EA Affordability (I assume you're referring to resale EA)

    from $4xxK at Jurong West/Pasir Ris

    Executive flats cost an average of $6xxK in Singapore

    Assuming you are both earning about $3500 and age 25-30 with no outstanding loan,

    HDB Loan: Max loan of $419,000 (90% of property price) which translates to a property price of $465,000 if you are taking 90% loan and 10% CPF/Cash.

    Bank Loan: Max loan of $419,000 (75% of property price) which translates to a property price of $558,000 if you are taking 75% loan, 20% CPF and 5% Cash.

    I assume you would use the CPF Housing Grant to offset/partially pay the CPF portion in the payment. (ie. $40,000 CPF Housing Grant for both Singapore Citizens for 5 room and bigger HDB resale)

    From this calculation, EA is a viable option if you are comfortable with the locations which are further away from the city. However, you would need to prepare more cash savings or CPF OA if you intend to purchase an average EA that cost more than $600K.

    EC Affordability

    There is no outstanding new ECs in the market and the next launch would be next year in Sumang (Punggol). For the past 2 launches, there are no 2 Bedrooms so the most affordable option is a 3 Bedroom unit.

    The lowest price unit from the last launch (Rivercove Residences in Sengkang) was $830,000. Rivercove land bid price was $355psf while the next EC launch's (Sumang Walk/Punggol) land bid price was $583psf.

    We would expect this EC price of a 3 Bedroom to be at least $9xxK.

    (You can only apply for bank loan for EC)

    Bank Loan: $467,000 (75% of property price) which translates to a property price of $622,000 if you're taking 75% loan, 20% CPF OA & 5% Cash. You would be eligible for $30,000 CPF housing grant if both you and your partner are both Singapore Citizens and I assume you would use it to partially pay the 20% CPF portion.

    From the above calculation, I would not advise you to go for an EC as you would need a combined cash/CPF OA savings of more than $400K (ie. $9xxK - $467,000 - $30,000).

    As a rule of thumb, usually we advise couples with more than combined monthly income of $8000 to consider for EC unless you have cash savings or financial support from your parents.

    Conclusion

    Hence, I would suggest going for BTO first before upgrading! Hope I provided a clear explanation! :)

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  • Kenichi Xi
    Kenichi Xi, nᴉʍ oʇ dǝnᴉʇsǝd 不能说的秘密 at Tag Team with Gabriel Tham
    151 Answers, 345 Upvotes
    Updated on 25 Sep 2018

    you should utilise the fact that your combined salary allows you to buy BTO.

    as u progress with higher salary you might not have a choice to buy BTO.

    BTO are alot cheaper and less captial upfront bcos you can utitlise ur cpf. i wun go deep into the numbers but this is usually the key decision factor.

    you also get to choose between HDB Loan or Bank Loan. EC only allows bank loan.

    the management fee for EC will be way higher then HDB maintenace fee.

    the only attaction point in EC is they have condo facilities tt u share w everyone and 10 years later u can sell it as a pte ppty with hearsay tt u sure can sell at a price higher then BTO.

    but bear in mind sales does not equate to profit margin.

    u will be surprise how much u can save over the 10 yrs with BTO and if u sell it like ur EC planning the profit margin will be way higher.

    Hope my reply helps.

    If you feel this reply have Quality, please upvote and check other Quality Reply.

    https://seedly.sg/profile/a-kenichi-xi

    Thank you.

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  • Gabriel Tham
    Gabriel Tham, Tag Team Member at Kenichi Tag Team
    Top Contributor

    Top Contributor (Feb)

    544 Answers, 918 Upvotes
    Answered on 26 Sep 2018

    I think is better to BTO HDB first. Make full use of all subsidies from govt and get a BTO. After that you can either sell or upgrade

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    • Teo See Hwa
      It use to be like that and I did it twice but not for the present because the Control measure make BTO worst investment when one can leverage.
      02 Jan 2019
  • Darryl Lee
    Darryl Lee
    3 Answers, 7 Upvotes
    Answered on 25 Sep 2018

    Hi there,

    Generally, I would recommend couples to go for a BTO first, before upgrading to a private property in the future.

    There is less of a drag on your finances (i.e lower capital outlay, higher financing available, lower maintenance fees) when choosing a BTO over an EC. In addition, your combined monthly income (est $7000) is unlikely to allow for a high quantity of financing from banks, thus requiring a huge upfront downpayment for an EC.

    In your situation, I humbly recommend that you go for the BTO route. However, if you wish to do otherwise for whatever reasons, we will respect your decision as well.

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    • Teo See Hwa
      There are a few thing to be aware if you follow the BTO route, use only one name, buy the smallest unit.
      02 Jan 2019
  • Teo See Hwa
    Teo See Hwa, MArketing Associate at Propnex
    49 Answers, 57 Upvotes
    Answered on 02 Jan 2019

    Many don't dare to leverage when they are young including myself.

    I borrow 20k cash from my dad in 1995 for my 5 room HDB deposit.

    You need to first understand yourself than calculate the risk.

    Your profile given is not enough for accurate sharing.

    You can message me if you are not comfortable to share here.

    87821025

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  • Jason Sin
    Jason Sin
    329 Answers, 419 Upvotes
    Answered on 27 Sep 2018

    I would recommend sticking to a BTO so that you and your wife could save up or invest to buy a new EC or EA after satisfying the 5 years MOP. This is because in the current climate where interest rates are rising, it may not be prudent to buy EC or EA as you would have to pay more for interests.

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    • Teo See Hwa
      Only when TDSR increase from 3.5% calculation then you need to worry about interest rate otherwise it will stay low for a long time.
      02 Jan 2019
  • JL
    Jason Lee
    1 Answers, 1 Upvotes
    Answered on 27 Sep 2018

    Let's be direct. Mid 3k is not alot and i would assume you guys are late 20s or early 30s. Why so fast want to buy EC? For pride? Buy BTO is cheaper and better for your finances... Don't be too eager to enjoy....

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  • Calvin Yo
    Calvin Yo
    4 Answers, 4 Upvotes
    Answered on 27 Sep 2018

    Question for you. What do you think your combined income be within 5 years. That should determine your choice. Unless is around or above $10k per month, should stick to BTO.

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  • Jonathan Chia Guangrong
    Jonathan Chia Guangrong, Fund Manager at JCG Fund
    Top Contributor

    Top Contributor (Feb)

    391 Answers, 552 Upvotes
    Answered on 27 Sep 2018

    Get a bto first before jumping into an ea/ec or private property. This will help you with managing your cash flow as the properties you mentioned will require substantial mortgage and both you and your partner may not be to support it financially. Typically more grants for bto as well. Probably a good time to sit down and plan your finances together before jumping into any purchase. Hope this helps

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    • Teo See Hwa
      True if property investment is out of the game otherwise bto will make property investment more difficult in future due to the control measure.
      02 Jan 2019
  • Jeff Yeo
    Jeff Yeo, amateur Social contributor at School of social sharing
    268 Answers, 390 Upvotes
    Answered on 25 Sep 2018

    I think going for BTO and taking all the grants available for the government would be a good first step.

    in the future when your salaries have grown, maybe consider other options. Who knows maybe you would go for a condo instead ?

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    • Teo See Hwa
      The Grant may be too little to compensate for the increase in property price in future. Land cost increase 100% in 7 years hope the grant is enough.
      02 Jan 2019