Freehold Condo Singapore
Guide to getting a Freehold Condo for yourself in Singapore
Do you aspire to get a freehold condo Singapore? That seems to be the dream for everyone living in the country.
Getting a freehold condo may be out of reach to many people. This guide shows you the right direction of getting one if you are so determined in this dream.
Freehold condo regions
The property market in Singapore is split into 3 regions:
- Core Central Region (CCR)
- Rest of Central Region (RCR)
- Outside Central Region (OCR)
More expensive condo properties are located inside the CCR. They include those from Districts 1, 2, 6, 9, 10 and 11. Many of them lie in close proximity to the MRT stations and the most prestigious schools of Singapore.
Cost of Freehold Condos in Singapore
Before we delve further to come to a decision, let’s take a look at the freehold condo prices below:
|Condo Name||Region||Price PSF||Condo Price (as of March 2021)|
|Arena Residences||Geylang||$1,758 to $1,834||$1,438,000 to $1,638,000|
|Dunearn 386||Bukit Timah||$2,282 to $2,782||$1,137,000 to $2,997,000|
|Lattice One||Thomson||$1,612 to $1,857||$1,500,000 to $1,884,688|
|Sloane Residences||Bukit Timah||$2,600 to $3,308||$2,290,000 to $4,860,000|
How much to afford one
Assume you are a 30-year-old employed person with no outstanding loans.
You also live with your parents, so your expenses are limited to the following monthly expenses:
Insurance – $400
Mobile plan – $25
Transport – $250
Food and entertainment – $1,000
Pocket money to parents – $500
With a total monthly expenses of $2,175, you want to pay off your freehold condo over 30 years, which is the maximum time allowed to take advantage of the full 75 percent Loan-to-value (LTV) limit.
I’ve based my numbers in the following breakdown on the assumption that you’re looking to get a condo that costs around $1.2million.
Let’s break down the costs needed to service the loan and work how much you need to earn:
Downpayment – upfront: $60,000
Downpayment – cash or CPF: $240,000
Bank Loan – total cost: $900,000
Bank Loan – monthly repayment: $3,400
Maintenance Fees – monthly: $300 to $1,000
Total required – monthly salary (after CPF): $5,875
Calculation as follows:
Expenses + Monthly Repayment + Minimum Monthly Maintenance Fee
= $2,175 + $3,400 + $300
The monthly repayment is based on loan calculation from DBS.
Considering the median monthly salary as of March 2021 is $4,573 (source), the monthly salary of $5,875 can be pretty troublesome.
These numbers are based on the assumptions that:
You do not invest/loan a portion of your salary (you should!)
You have enough savings to cover the 25% downpayment.
The interest rate on your bank loan remains at 2.12.2 percent (after the fifth year, it is highly dependent on the bank’s fluctuating rates).
Your home insurance policy’s cost remains the same – which it will not.
When you move from a HDB to a condo, insurance companies typically charge a higher premium. This is very taxing and burdensome on your finances indeed!
Not to mention the inflation rates, which the Monetary Authority of Singapore (MAS) monitors via the Consumer Price Index, or CPI.
Singapore’s CPI increased by 0.4 percent year on year in 2018, according to data from the Singapore Department of Statistics governmental organisation or Singstat for short.
CPI takes into account everything from education to housing to healthcare, so it’s safe to say your monthly expenses will inevitably rise.
Other Factors to Think About
Do you meet the TDSR (Total Debt Servicing Ratio)?
The TDSR effectively limits your debt repayments by capping them at 60% of your monthly income.
Debt repayments include the following:
- Loans for individuals
- Auto loans
- Outstanding mortgages
So, if your monthly take-home pay is S$8,000 (after CPF deduction), but your loans total S$5,600, you’ve already spent 70% of your monthly income.
Your application for a freehold condo is almost certainly going to be denied.
Alternatively, you may be required to make a larger downpayment on your freehold condo.
Obtaining A Bank Home Loan
Hello, HDB loans and grants.
Unless you’re some kind of Lee Ka-shing, paying off your freehold condo will require you to take out a bank loan, which you’ll only be able to get if you have a good credit score.
However, bank home loans can only cover 75% of the cost of your property.
That means you’d have to be able to comfortably cover the remaining 25%, which would be divided into the following ratios:
- 5% down payment (in cash)
- a 20% discount (cash or CPF)
Then there’s the issue of bank interest rates, which are enough to put me off even considering a freehold property.
Bank loan interest rates are currently around 2% to 2.5 percent per year.
Rates typically rise significantly after the fourth year, so plan ahead of time in case your bank’s interest rates change.
If you have other property loans outstanding, you’re out of luck – your bank will only lend you 50% of the cost of your freehold condo.
To obtain a bank loan, you must have a good credit score.
Is Buying a Freehold Condo the Best Option?
While the term “freehold” literally means “estate in perpetuity” in the most Platonic sense, it does not mean “forever.”
Not in Singapore, at any rate. Unfortunately, in reality, this is how it goes in Singapore.
It is heavily reliant on the URA’s masterplans. If plans for an MRT line coincide with the location of your property, you will be reimbursed at best.
Other factors that may jeopardize your freehold property include:
- En bloc sales are a possibility.
- Location: A leasehold condo in a better location (for example, near Newton MRT) would be preferable to a freehold condo in, say, Boon Lay.
- Additional Buyers Stamp Duty (ABSD): If you bought your freehold condo but haven’t sold your previous home, you may be required to pay ABSD. In some cases, you may be able to get this waived.
When it comes down to it, owning a freehold condo sounds pretty cool on paper – and it also comes with bragging rights. So there’s indeed a trade-off in both sides of the story
However, if status symbol is all you’re after, you might want to reconsider investing in one. Well, you just have to think carefully and plan out what you want in your life so that you do not regret it later.
Do you have anymore suggestions or any feedback to raise regarding freehold condo Singapore?