Combined income of $3K per month able to afford a 4-room flat?

Monday, January 18, 2010

This is one of the questions that keeps popping out in my mind recently...

Never mind my long absence in blogging for I guess you all know the reason(s) for my disappearance... What??? You dunno... hiyahz... need me to spell out so speifically anot??? Okie la... the reason is one word.... LAZY!

Back to the topic.

Can a young couple earning a combined income of $3,000 per month REALLY able to afford a 4-room flat as claimed by Mr M??? Just what makes the Mr M feels that Singaporeans can afford to pay for the rocket-high priced HDB small flats???

To find out if Mr M is correct, I have decided to do a rough calculation on this pair of fictitious couple who earns an combined income of $3,000 per month and YESH... I'm quite bo liao also...

See below

Out of the $3,000, 20% goes to their CPF accounts. That's $600 ($300 each) and this couple is left with only $2,400 cash per month.

Their employers make contribution of 14.5% of the wages to their CPF accounts and that's $435 ($217.50 each). In another words, each of them makes a total contribution of $517.50 to their CPF accounts.

A lot??? Think again! Not the full amount goes into the Ordinary Account (OA). The ratio of contribution distributed to the Ordinary, Special and Medisave Account is 0.6667:0.1449:0.1884 respectively.

In another words, the exact amount that goes into the OA is only $345.015 each per month. (I'm only talking about OA balances here cos we can only use the OA for housing instalments.)

To make my illustrations easier, I shall omit those nitty gritty details and just assume this couple has been working for quite some time and has an accumulated OA savings of $30,000. Say the flat they wish to own costs S$250,000. After deducting $30,000 from their OA, they are still short of $220,000. So bo bian, get a loan from HDB. Nothing comes for free. You need a loan, you pay for the interest. HDB interest is pegged at 0.1% above the OA interest which is 2.6% per annum.

Now, we assume this couple opts for the maximum loan period which is 30 years. For a loan of $220,000 at an interest rate of 2.6% for a period of 30 years, how much is the monthly instalment leh??? Actually, the answer is.....

I DUNNO LAH!

hahahaha

As HDB uses the reducing balance method to charge interest, it is very tedious for me to explain exactly how much this couple has to pay per month. So let's do it the simple way. Anyway, this example is just a guide... dun so gek gao la...

Using simple Mathematics, this couple will roughly have to pay $1,087.77 per month of their housing instalment.

How do I derive this amount???

$220,000 * 2.6% per annum/360 months = S$1,087.77

This amount exceeds their total OA contribution ($690.03 in total) by $397.74. In another words, this couple will have to fork out a cash amount of $397.74 per month to service their housing instalments.

Back to the remaining of their wages after deducting the CPF contributions. If you scroll back, this couple has $2,400 left. If you deduct the cash amount they need to use for their housing instalments, they are still left with $2,002.26.

Now come the expenses of the couple.

Say this couple doesn't have a car (cannot afford la... got so many ERPs), they will need to take public transport. Given the ulu pandan place they live in (excuse me hor... $250,000 flat u want to live in Central area meh??? Dream on lo... of course ulu pandan la), I'll say their transportation fee per month will probably be around $150 each. So that's another $300 gone from their income - left $1,702.26.

How about food??? Young couples don't cook so they are probably going to stuff themselves with outside food. Say one day each of them spend $10 on food and drinks (breakfast, lunch and dinner) so total expenditure on food will be around $600 per month. Their income is now left with $1,102.26.

Utility bills, town council bills, mobile phone bills, internet broadband bills and whatever kind of bills leh??? Somemore the Government is going to increase the SP service bills yet again leh... Say all these bills add up to $200 per month la... so income left - $902.26.

Parents leh??? They brought them up with their blood and sweat. Now that they are all grown up, it's time for them to repay their parents by giving them some monies every month right? Say each of them gives $200 to their own parents per month (sibei little). Their total income is now left with only $502.26.

I have not included insurance policies, endowment plans, blah blah blah in yet okie. Let's just say this fictitious couple has none of these la... so all that are listed above are the expenses of an ordinary young couple.

If you do your own calculations, all the amount that I've quoted are the MINIMUM a young couple can spend... which means to say $502.26 is actually the MAXIMUM this couple can save per month.

Note: The price of the flat in this example is only S$250,000 hor... if a couple with $3K combined monthly income wants to purchase a flat of higher value, it means total savings is going to be lesser than $500.

End of example. Thank you very much.

Question Time

Now I'm throwing this question back to Mr M.

$500 a lot???

HELL NO!

What about renovation??? What about furniture??? What about wedding cost??? Huh huh huh???

Dun tell me can use savings la... how much can a young couple who earns a combined income of $3,000 per month save???

I've been through this and done that. Ah Long & I have been saving diligently shortly after we date and yet our savings wasn't enough for our renovation + furniture + wedding add together okie... Ah Long had to fork out some of his personal savings lo hor...

Note: We can save A LOT. Still, it wasn't enough.

So the banks come up with things like renovation loan, bridging loan, etc to help these people in need to tide over... BUT it comes with a price too.... high interest payment.

If and only if this ficticious couple took up a renovation loan, do you still think they can save $500 per month?? How much of that goes to the repayment??? Huh Huh Huh...

Then suay suay bo suay pregnant how??? Does the million-dollar wage minister Mr M know how much it cost to see a gynae now??? Okie la... don't talk about private hospital like Gleneagles or Thomson la... just KK Hospital la... someone please tell him how much is the hospital fee right now hor.

In addition, please also highlight to him the cost of milk powder, diapers, baby doctor's fee (polyclinic one), infant/child care centre, etc and etc.

If both parents go out to work, who look after the baby??? Parents??? In laws??? Childcare centre??? Nannies???

Whatever option it is... does it all concern money???

So here comes the question again....

$3,000 enough??? Wo *pui*

*******************

To my dear Government

"You are the ones who advise us to save for rainy days but you are also the ones who conveniently "soot" our hard-earned money away.

Yes, $3000 may be enough to buy the couple a flat but they are going to live in misery. Do you know that??? A 4-room flat is so unachievable for young couples now.... and u still want to up your birth rate???

Want to have the best of both worlds huh??? U TKK la...

No flat means no babies la... simple logic wat... who wants to have babies and stay with parents or in-laws de (stay NEAR parents or in-laws yes... but stay WITH parents or in-laws needs consideration)... Plus it's going to be so cramp la cos the flat built by HDB is getting smaller and smaller every decade... I dun want to go on with the small rooms that only allow us to put one queen size bed and wardrobe blah blah blah....

So.....

STOP insisting that an couple earning S$3,000 can afford a 4-room flat! Whoever scholar that helped you craft your speech about this must have failed his/her Mathematics terribly.

Luckily lao niang marry young. Got my prime location flat cheap cheap... well... not exactly cheap but definitely cheaper than what it is now. What a HUGE inflation we have in Singapore.

Well, I'm not saying Singapore is no good or blah blah blah. If you have been following my blog, you should have read it somewhere at the top left hand corner of my blog page that I have a love-hate relationship with Singapore.

I love Singapore for its everything but I hate the fact that we Singaporeans allow too much power to a monopoly PAP. Not healthy... super not healthy... but what can we do???

Absolutely nothing!!!

I dunno if it's bcos we are all afraid to do anything or bcos we are simply the infamous BO CHAP society.

BUT.... whatever la... we can't do anything to this system and that's a fact every Singaporean knows.

Ting's prediction for future Singapore

"You all know banks got differentiate between normal customers and prestige customers one right?? Those with networth sibei high one will be the prestige ones la... then got personal relationship manager managing their accounts blah blah blah la...

I tell you... my prediction of Singapore 20 years down the road will be something like this lo...

Only the rich can stay in Singapore. Networth less than how much how much (I dunno la... the inflation Singapore is experiencing right now + I'm not an economist... how the hell I know) cannot stay in Singapore...

If you do not have that kind of required assets YET do not want to renounce your Singapore citizenship , the Gahmen will probably transport this group of people to neighbouring islands owned by Singapore lo... u know... those small small useless islands... Pulau Ubin I think cannot cos they got big plans for that place."

Hiyah... I think that's it about our crazy property prices la... although I can go on forever.

*Love ya Singapore*