So you’ve decided to join the class of homeowners in Singapore.
Or at least dream about it.
There are 1.62 million houses in Singapore. 1.16 million, or 71.5% of them are HDB flats. The remaining comprise 375 thousand condominium units, and 75 thousand landed properties.
I hear many complaints about how housing feels out of reach for the younger generation.
Yet everyone intends to get a house.
In fact, that is part of the Singapore government’s messaging.
Have you ever considered not owning a house?
Here are some reasons not to.
It costs too much
Buying a house comes with a hefty price tag.
Property is the average Singaporean’s largest asset.
So it doesn’t come cheap.
The average 4-room flat costs $672,000.
That’s about $2300 a month in housing loans, on top of a $168,000 downpayment.
That’s because property loans are capped at 75%, and the other 25% has to come from a downpayment.
And this is for a loan that will last 25 years.
Now, it is true that this can be repaid with CPF.
But money is money, and funds that go towards loan repayment are funds that cannot be spent, saved, or invested elsewhere.
The locations are bad
What is a bad location?
It depends on your lifestyle.
A working-age family will want easy access to amenities and work and school.
The commuter who takes bus/LRT and MRT has an average commute time of 60 minutes.
This is the most common form of transport, at over 25%.
This is also a bad way to live.
The bus stops are hot and the bus frequencies would make a gambler proud.
Not only that, but commutes are one negative thing that we don’t get used to over time.
And yet the majority of large towns are located far from the city centre.
These would be towns like Woodlands, Yishun, Jurong West, and Sengkang/Punggol.
Not to mention upcoming locations like Tengah.
Many houses are not in desirable locations, and we see fierce competition for those that are.
They don’t make a lot of money
Well, let me rephrase that.
They don’t make a lot of money for the risk you take on.
Property returns come largely from leverage, not from the appreciation of the underlying asset.
Property yields only about a 3-4% return.
It is only when it is juiced up with 4x leverage that you hear of eye-popping returns.
But leverage is extremely risky.
You can’t maintain payments in the face of unexpected life events.
Not only that, you invest in a single asset that has no diversification and poor liquidity.
Plus, it costs a lot to buy and sell a property.
So they don’t make a lot of sense as an investment.
Plus, you’re already living in one! Talk about putting your all your eggs in one basket.
All of these are good reasons not to own a home.
But Singaporeans will want to own a home anyway.
I own my home.
It is not about the financial reasons.
It is in spite of them.
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