Singaporean Matters: Living within your means

Why Young Singaporean Couples Should Avoid Overextending on Condo Purchases

Buying a home is one of the most significant financial decisions you’ll make in your lifetime. For young Singaporean couples, the allure of owning a private condominium is strong, but it’s crucial to approach this decision with caution. While the idea of living in a swanky condo with amenities like swimming pools and gyms is appealing, overextending financially can lead to long-term stress and financial instability.

The Reality of Private Property Prices

Private property prices in Singapore have been on a steady rise. As of 2024, the average price per square foot (psf) for a condominium in the Core Central Region is around $2,500 to $3,000. In the Rest of Central Region, prices are slightly lower but still significant, ranging from $1,800 to $2,200 psf​​. A typical 1,000 square foot condo, translates to a purchase price of $1.8 million to $3 million, not including additional costs such as stamp duties, legal fees, and maintenance fees.

The Risks of Overextending

With higher property prices come higher mortgage payments. For instance, a $1.5 million loan for a 30-year tenure at a 2.85% interest rate results in monthly payments of around $6,200. Compare this to a $600,000 loan for an HDB flat, where monthly payments are about $2,500. The difference of $3,700 per month can significantly impact your monthly budget and savings potential.

Assuming a couple each earns $5,000 per month, the Central Provident Fund (CPF) contributions for an employee and employer are based on the employee’s age and monthly wage. For a Singaporean in their 20s earning $5,000 a month, the CPF contributions can be calculated as follows:

• Employee’s contribution: 20% of $5,000 = 0.20 * $5,000 = $1,000
• Employer’s contribution: 17% of $5,000 = 0.17 * $5,000 = $850
• Total (Employee + Employer): $1,000 (employee) + $850 (employer) = $1,850

For individuals in their 20s, CPF contributions are allocated as follows:

• Ordinary Account (OA): 61% of total CPF contributions