Affordability Estimation of HDB Upgraders

[Kelonguni]

As Teddybear requested, here is a basic analysis for proof of concept of affordability for this group.

Some basic info: At least 80% of Singaporeans live in HDB flats.

Firstly, what is the 4X ratio that Minister Khaw referred to? I believe that it was actually a reference parameter (as a whole for new BTO) in non-mature estates.

"We can now pause and see what else we can do to bring BTO prices in non-mature estates to, say, around four years of salary as it was before the current property cycle started," he said then.

Even the five-roomer, at 5.36 times the annual income, falls within the affordable range for that income group, he added.

Nor should we expect all flat types to be equally affordable by this ratio, said experts. Larger flats cost more times one's income because public housing is priced "according to ability to pay", said Prof Phang.

Housing affordability is not just about setting prices, but encouraging a match between house type and household income level, said Prof Sing.

"Lowering housing prices for larger flats is not a good strategy or policy... it may induce some lower-income households to buy large houses, which could further distort the housing price to income ratio," he said. - See more at: http://business.asiaone.com/news/new....Tm45jVXP.dpuf

In other words, it is not meant for resales flats, mature estates, condominiums and other private properties.

Next is the income parameter. My estimation is that only the top 50th percentile will have intention to be upgraders. Why from 50th and not higher? The reason is because some of the younger ones have not reached the peak of their earning capacity but have already reached 50th percentile at a relatively young age. Nonetheless its good to be conservative and calculate from 60th to 80th percentile.

The harder thing is to calculate their actual income. Based on the stats:

https://www.singstat.gov.sg/docs/def...ure/pp-s21.pdf

In 2014, the 60th percentile earned $3,217 per household member while the 80th percentile earned 5,524. Multiplied by the average size of households of about 4 (5rm HDB), we are looking at $12-$22K income from work per household.

A BTO bought easily brings 150-200K of equity into the picture (difference between BTO and resales). Depending on the years worked, there must also have been savings and CPF.

We can do affordability calculations based on a few scenarios of age, household sizes, target (to upgrade or own multiple properties). Basically, it is very possible to upgrade once 5 year MOP is up and the breadwinners stay employed and active in growing their incomes.

[teddybear]

Kelonguni,

Comments to your post:

1) Despite your claim of "analysis for proof of concept of affordability", I still didn't see any detail analysis and proof!

Shouldn't you be telling us how much a family unit (e.g. a 3 bedroom 1200 sqft) OCR private condos costs (say roughly $1.44 Millions!),
and linking that back to how much loan is needed and what is the minimum household income required for a HDB upgrader to pass TDSR to buy that $1.44M property???

Without linking household income of HDB upgraders to TDSR and to family-sized OCR property price, how could you conclude that:
"it is very possible to upgrade once 5 year MOP is up"??????????????????????????


2) Regarding your claim:

In 2014, the 60th percentile earned $3,217 per household member while the 80th percentile earned 5,524. Multiplied by the average size of households of about 4 (5rm HDB), we are looking at $12-$22K income from work per household.

I am 100% SURE that your figure of $12k to $22k income pm for the 60th-80th percentile is DEAD WRONG!
I suggest you check the document that you posted the link to us again and update us with the correct figures.
Please do not mislead other forumers!


3) In response to your statement: "The harder thing is to calculate their actual income...",
I would like to tell you that there is no need to calculate like you do and making baseless assumptions (like "average size of households of about 4"), you just need pick it out from the report!
Did you really read the report OR you read and still can't understand the data and statistics in there???

Looking forward to your corrections and your "analysis for proof of concept of affordabilty" for the HDB upgraders (so that we now have meaningful discussions instead of empty and baseless talk from you)..........

As Teddybear requested, here is a basic analysis for proof of concept of affordability for this group.

Some basic info: At least 80% of Singaporeans live in HDB flats.

Firstly, what is the 4X ratio that Minister Khaw referred to? I believe that it was actually a reference parameter (as a whole for new BTO) in non-mature estates.

"We can now pause and see what else we can do to bring BTO prices in non-mature estates to, say, around four years of salary as it was before the current property cycle started," he said then.

Even the five-roomer, at 5.36 times the annual income, falls within the affordable range for that income group, he added.

Nor should we expect all flat types to be equally affordable by this ratio, said experts. Larger flats cost more times one's income because public housing is priced "according to ability to pay", said Prof Phang.

Housing affordability is not just about setting prices, but encouraging a match between house type and household income level, said Prof Sing.

"Lowering housing prices for larger flats is not a good strategy or policy... it may induce some lower-income households to buy large houses, which could further distort the housing price to income ratio," he said. - See more at: http://business.asiaone.com/news/new....Tm45jVXP.dpuf

In other words, it is not meant for resales flats, mature estates, condominiums and other private properties.

Next is the income parameter. My estimation is that only the top 50th percentile will have intention to be upgraders. Why from 50th and not higher? The reason is because some of the younger ones have not reached the peak of their earning capacity but have already reached 50th percentile at a relatively young age. Nonetheless its good to be conservative and calculate from 60th to 80th percentile.

The harder thing is to calculate their actual income. Based on the stats:

https://www.singstat.gov.sg/docs/def...ure/pp-s21.pdf

In 2014, the 60th percentile earned $3,217 per household member while the 80th percentile earned 5,524. Multiplied by the average size of households of about 4 (5rm HDB), we are looking at $12-$22K income from work per household.

A BTO bought easily brings 150-200K of equity into the picture (difference between BTO and resales). Depending on the years worked, there must also have been savings and CPF.

We can do affordability calculations based on a few scenarios of age, household sizes, target (to upgrade or own multiple properties). Basically, it is very possible to upgrade once 5 year MOP is up and the breadwinners stay employed and active in growing their incomes.

[Kelonguni]

Relax brudder. I will break it down for you slowly. You have no idea how upgraders work so I will have to break it into pieces for digestion.

Kelonguni,

Comments to your post:

1) Despite your claim of "analysis for proof of concept of affordability", I still didn't see any detail analysis and proof!

Shouldn't you be telling us how much a family unit (e.g. a 3 bedroom 1200 sqft) OCR private condos costs (say roughly $1.44 Millions!),
and linking that back to how much loan is needed and what is the minimum household income required for a HDB upgrader to pass TDSR to buy that $1.44M property???

Without linking household income of HDB upgraders to TDSR and to family-sized OCR property price, how could you conclude that:
"it is very possible to upgrade once 5 year MOP is up"??????????????????????????


2) Regarding your claim:


I am 100% SURE that your figure of $12k to $22k income pm for the 60th-80th percentile is DEAD WRONG!
I suggest you check the document that you posted the link to us again and update us with the correct figures.
Please do not mislead other forumers!


3) In response to your statement: "The harder thing is to calculate their actual income...",
I would like to tell you that there is no need to calculate like you do and making baseless assumptions (like "average size of households of about 4"), you just need pick it out from the report!
Did you really read the report OR you read and still can't understand the data and statistics in there???

Looking forward to your corrections and your "analysis for proof of concept of affordabilty" for the HDB upgraders (so that we now have meaningful discussions instead of empty and baseless talk from you)..........

[Kelonguni]

Household Income.jpg

Household Sizes.jpg

Average Household.jpg

The authorities only publish the exact 50th percentile figures but do not indicate precisely the 60th and 80th percentile figures. They do indicate the percentage changes over the previous year though for each percentile. Anyone who has the detailed figures please chip in before I could proceed with the more detailed calculations. I believe the data is quite accurate as the average household income for 5-room flats is $11,606 in 2014, and we are looking at the 60th to 80th percentile.

My experience is based on seeing people do it and sensing the background statistics. The academic exercise could show how they did it, but it's mainly to demonstrate to Teddy the sustainability of the figures.

To be continued...

[teddybear]

Alamak! People give you so much data you also don't know how to use???
There is no need for us to spoon feed you right???

Ok, ok, The Table 18 of the report you mentioned, as obtained from the website https://www.singstat.gov.sg, is as attached here.

You will be able to calculate roughly how much those in the 60th to 80th percentile highest household income are really earning (and they are definitely earning much less than the $12-$22K income you told us!!!!!!!)............

Now that I have given you solid household income data from singstat.gov.sg which you can just pluck and use, you should be able relate to TDSR and hence the maximum property price they are allowed to buy by MAS/Singapore Government???

Household Income.jpg

Household Sizes.jpg

Average Household.jpg

The authorities only publish the exact 50th percentile figures but do not indicate precisely the 60th and 80th percentile figures. They do indicate the percentage changes over the previous year though for each percentile. Anyone who has the detailed figures please chip in before I could proceed with the more detailed calculations. I believe the data is quite accurate as the average household income for 5-room flats is $11,606 in 2014, and we are looking at the 60th to 80th percentile.

My experience is based on seeing people do it and sensing the background statistics. The academic exercise could show how they did it, but it's mainly to demonstrate to Teddy the sustainability of the figures.

To be continued...

[nydeidith]

hmmm whats the purpose of this argument?

[Kelonguni]

Funny lah you bro... People give you data include CPF, you give data exclude CPF and say not accurate. I give you HDB data (for upgraders), you throw back national data. National data is easily obscured by people living in all kinds of housing including landed properties who do not need to work for life, retirees etc, pulling down the affordability outlook.

It's not that easy to calculate with this kind of percentages, I am sure you will agree.

Anyway, can also carry on with this analysis no problem. Let me make the best sense of the areas you can understand and progress from there.

To be continued.

Alamak! People give you so much data you also don't know how to use???
There is no need for us to spoon feed you right???

Ok, ok, The Table 18 of the report you mentioned, as obtained from the website https://www.singstat.gov.sg, is as attached here.

You will be able to calculate roughly how much those in the 60th to 80th percentile highest household income are really earning (and they are definitely earning much less than the $12-$22K income you told us!!!!!!!)............

Now that I have given you solid household income data from singstat.gov.sg which you can just pluck and use, you should be able relate to TDSR and hence the maximum property price they are allowed to buy by MAS/Singapore Government???

[Kelonguni]

Hi, no particular purpose. Just playing chess with my best friend here since nobody can buy, nobody can sell. Purely academic exercise.

Teddybear's aim is to prove that HDB upgraders cannot afford OCR property of 1.44m and therefore OCR prices will crash.

My aim is to show that HDB upgraders can comfortably afford properties from 800K to 1.2m and therefore OCR prices are highly sustainable.

We will be talking disjointed most of the time, so you would have to decide whose logic to pick or ignore us altogether.

hmmm whats the purpose of this argument?

[teddybear]

Given that we have full details of National income data but not HDB data, it would seem better to use National data.

If you use HDB data, you should also take into consideration those living in 4-room, 3-room, 2-room HDB flats and also those living in rental flats etc because they could also be HDB upgraders isn't it?

Anyway, the National data would also include many people who are living in private properties but earn that lower income of 60-80th percentile, thus falsely increasing the number of would-be "HDB upgraders" that you are looking at (which is more beneficial to you in your argument that there are lots of "HDB upgraders" who can easily upgrade to OCR private condos)............

At income of >$6k pm, include or exclude employers' CPF make not much difference because you can add that in (20% of $6k which is max cap for employers' CPF contribution). But then, a big chunk of these money cannot be used for paying for buying properties (because stuck in CPF Special Account and Medisave Account), so really if you include Employers' CPF money into income you would still need to minus them out, so make sense not to include isn't it?

And we have not even talked about Household expenses yet.......
When you look into that, you would find that many so-called "HDB upgraders" even if they passed TDSR and can upgrade to a OCR private condo of >$1M, they would have no money to retire and sooner or later will have to downgrade again or cash out of their OCR private property in order to have money to retire........... (This means they "CANNOT AFFORD" that OCR private property!).

A property should be considered "Affordable" only if the family is able to pay up for the property within his working life and still have enough savings to retire (in that property without selling it) isn't it?

Funny lah you bro... People give you data include CPF, you give data exclude CPF and say not accurate. I give you HDB data (for upgraders), you throw back national data. National data is easily obscured by people living in all kinds of housing including landed properties who do not need to work for life, retirees etc, pulling down the affordability outlook.

It's not that easy to calculate with this kind of percentages, I am sure you will agree.

Anyway, can also carry on with this analysis no problem. Let me make the best sense of the areas you can understand and progress from there.

To be continued.

[Kelonguni]

Your eloquence and logic surprises me when you are calm. Give me some time to address them.

1. Can. Let you set the game conditions. But we must add disclaimers.

2. Rental flat upgraders! Steady. How did you think of that?

3. I am glad you finally acknowledged that private property owners may not be high income earners.

4. Noted.

5. Noted. Will have to show the sustainability without costing an arm and leg.

1. Given that we have full details of National income data but not HDB data, it would seem better to use National data.

2. If you use HDB data, you should also take into consideration those living in 4-room, 3-room, 2-room HDB flats and also those living in rental flats etc because they could also be HDB upgraders isn't it?

3. Anyway, the National data would also include many people who are living in private properties but earn that lower income of 60-80th percentile, thus falsely increasing the number of would-be "HDB upgraders" that you are looking at (which is more beneficial to you in your argument that there are lots of "HDB upgraders" who can easily upgrade to OCR private condos)............

4. And we have not even talked about Household expenses yet.......
When you look into that, you would find that many so-called "HDB upgraders" even if they passed TDSR and can upgrade to a OCR private condo of >$1M, they would have no money to retire and sooner or later will have to downgrade again or cash out of their OCR private property in order to have money to retire........... (This means they "CANNOT AFFORD" that OCR private property!).

5. A property should be considered "Affordable" only if the family is able to pay up for the property within his working life and still have enough savings to retire (in that property without selling it) isn't it?

[Ilikeu]

Your eloquence and logic surprises me when you are calm. Give me some time to address them.

1. Can. Let you set the game conditions. But we must add disclaimers.

2. Rental flat upgraders! Steady. How did you think of that?

3. I am glad you finally acknowledged that private property owners may not be high income earners.

4. Noted.

5. Noted. Will have to show the sustainability without costing an arm and leg.

Let me help you out here since teddybear is now calm and cool. Below table shows the household income required to meet the TDSR 60% for the range of selling price of ppty and the range of age. Of course, we have to assume the upgraders have saved enough CPF and cash to make the 20% downpayment and stamp duties. It is quite clear that a household income, say $12k (ceiling for BTO buyer) can upgrade to private ppty when they are less than 45 years old.

TDSR 60%
Interest 3.50%
Loan Tenor Up to 65 years old
Loan 80%

Assumed no other recurring monthly installment


Sensitivity Table for Household Income to satisfy TDSR 60%

Price
$800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000
Age 30 $4,408 $5,511 $6,613 $7,715 $8,817 $9,919 $11,021
32 $4,546 $5,682 $6,819 $7,955 $9,091 $10,228 $11,364
34 $4,703 $5,878 $7,054 $8,230 $9,405 $10,581 $11,757
36 $4,884 $6,104 $7,325 $8,546 $9,767 $10,988 $12,209
38 $5,094 $6,367 $7,640 $8,914 $10,187 $11,461 $12,734
40 $5,340 $6,675 $8,010 $9,345 $10,680 $12,015 $13,350
42 $5,632 $7,040 $8,448 $9,856 $11,264 $12,672 $14,080
44 $5,983 $7,479 $8,975 $10,470 $11,966 $13,462 $14,958
46 $6,412 $8,015 $9,617 $11,220 $12,823 $14,426 $16,029
48 $6,945 $8,681 $10,418 $12,154 $13,890 $15,626 $17,363
50 $7,625 $9,532 $11,438 $13,344 $15,251 $17,157 $19,064

[Kelonguni]

Thanks buddy. I like you. Super steady.

Upgraders will be able to directly use the table to see what they could afford based on their age and income.

Already can predict Teddybear's objections - household expenses lah for example. Thanks for lightening my workload though for follow up. This is a great reference table.

Let me help you out here since teddybear is now calm and cool. Below table shows the household income required to meet the TDSR 60% for the range of selling price of ppty and the range of age. Of course, we have to assume the upgraders have saved enough CPF and cash to make the 20% downpayment and stamp duties. It is quite clear that a household income, say $12k (ceiling for BTO buyer) can upgrade to private ppty when they are less than 45 years old.

TDSR 60%
Interest 3.50%
Loan Tenor Up to 65 years old
Loan 80%

Assumed no other recurring monthly installment


Sensitivity Table for Household Income to satisfy TDSR 60%

Price
$800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000
Age 30 $4,408 $5,511 $6,613 $7,715 $8,817 $9,919 $11,021
32 $4,546 $5,682 $6,819 $7,955 $9,091 $10,228 $11,364
34 $4,703 $5,878 $7,054 $8,230 $9,405 $10,581 $11,757
36 $4,884 $6,104 $7,325 $8,546 $9,767 $10,988 $12,209
38 $5,094 $6,367 $7,640 $8,914 $10,187 $11,461 $12,734
40 $5,340 $6,675 $8,010 $9,345 $10,680 $12,015 $13,350
42 $5,632 $7,040 $8,448 $9,856 $11,264 $12,672 $14,080
44 $5,983 $7,479 $8,975 $10,470 $11,966 $13,462 $14,958
46 $6,412 $8,015 $9,617 $11,220 $12,823 $14,426 $16,029
48 $6,945 $8,681 $10,418 $12,154 $13,890 $15,626 $17,363
50 $7,625 $9,532 $11,438 $13,344 $15,251 $17,157 $19,064

[teddybear]

Sorry to bug you but is it so difficult to have a rough calculation of the property price allowed under TDSR for a family with say household income of say $12,000 per month?

I think I could give a rough figure within 10 minutes......

Thanks buddy. I like you. Super steady.

Upgraders will be able to directly use the table to see what they could afford based on their age and income.

Already can predict Teddybear's objections - household expenses lah for example. Thanks for lightening my workload though for follow up. This is a great reference table.

[Kelonguni]

Buddy Ilikeu table already shows it clearly. Even sorted by age. And different quantum some more.

What is more difficult is to pinpoint the specific amounts available for upgraders.

But individually people can already make their own conclusions based on that table.

Sorry lah I salaried employee so need to work to protect my income. Very chui after work leh.

Analysis will take time for me. Anyone can chip in actually. Yourself included.

Sorry to bug you but is it so difficult to have a rough calculation of the property price allowed under TDSR for a family with say household income of say $12,000 per month?

I think I could give a rough figure within 10 minutes......

[teddybear]

Now, what is the maximum property price that OCR folks can afford under the TDSR criteria and calculation (according to Singapore Government/MAS)???

As I said, I can give you a rough figure within 10 minutes, so here it goes............

Let's start with FIXED median gross household income pm = $8k (Note that this is fixed salary income, not variable otherwise there will be 30% hair-cut!)
The family probably has about $1k other debt instalments (eg credit card).
So TDSR at 60% = $4800 pm.
Estimated max loan amount = $655,217.
Assuming a loan tenure of 20 years, Monthly mortgage instalment required = $3377.
Assuming the family is buying their 1st property and can loan 80%, then max property price they can afford = $819k.
Tada!! Singapore Government /MAS already told us what you is the max property price you can afford when implementing TDSR!!

And remember, this $819k is the MAXIMUM property price, and if the OCR folk commit to that, he probably has no money to retire! A simple calculation will tell us so:
Gross monthly household income pm = $8000.
Take-home income pm after contributing to employee CPF = $6400.
Assume their CPF used to pay instalment = $1600,
and cash used to pay instalment = $3377 - 1600 = $1777,
then left money in pocket = $6400 - $1777 = $4623.
Pay other instalment (credit card etc) $1000, left money in pocket pm = $3623.
Other Household expenses pm probably about = $3500,
so money saved pm only about = $123 (vs expenses per month = $4500 !)
Wow! Like that forever must work until die also has not enough savings to retire!
Ultimately, the person has to cash out of the property to fund retirement and downgrade to studio or resort to renting (hope their money for rental can last until they passed away)..............

Buddy Ilikeu table already shows it clearly. Even sorted by age. And different quantum some more.

What is more difficult is to pinpoint the specific amounts available for upgraders.

But individually people can already make their own conclusions based on that table.

Sorry lah I salaried employee so need to work to protect my income. Very chui after work leh.

Analysis will take time for me. Anyone can chip in actually. Yourself included.

Sorry to bug you but is it so difficult to have a rough calculation of the property price allowed under TDSR for a family with say household income of say $12,000 per month?

I think I could give a rough figure within 10 minutes......

[teddybear]

Sorry, some correction and clarification here:

TDSR at 60% = $4,800 pm.
Other debt instalment etc per month (eg credit card) = $1,000 pm.
So, left eligible cash to service loan = $3,800 pm.
Assuming a loan tenure of 20 years, and MAS mandated interest rate of 3.5% to calculate max loan eligble, so Estimated max loan amount = $655,217.

What is the possible savings if servicing loan at $3,800 pm?:
Gross monthly household income pm = $8000.
Take-home income pm after contributing to employee CPF = $6400.
Assume their CPF used to pay instalment = $1600,
and cash used to pay instalment = $3800 - 1600 = $2200,
then left money in pocket = $6400 - $2200 = $4200.
Pay other instalment (credit card etc) $1000, left money in pocket pm = $3200.
Other Household expenses pm probably about = $3500,
so money saved pm only about = -$300 (vs expenses per month = $4500 !)

Now, tell us, how can the couple in the family retire at 65 years old??????

Now, what is the maximum property price that OCR folks can afford under the TDSR criteria and calculation (according to Singapore Government/MAS)???

As I said, I can give you a rough figure within 10 minutes, so here it goes............

Let's start with FIXED median gross household income pm = $8k (Note that this is fixed salary income, not variable otherwise there will be 30% hair-cut!)
The family probably has about $1k other debt instalments (eg credit card).
So TDSR at 60% = $4800 pm.
Estimated max loan amount = $655,217.
Assuming a loan tenure of 20 years, Monthly mortgage instalment required = $3377.
Assuming the family is buying their 1st property and can loan 80%, then max property price they can afford = $819k.
Tada!! Singapore Government /MAS already told us what you is the max property price you can afford when implementing TDSR!!

And remember, this $819k is the MAXIMUM property price, and if the OCR folk commit to that, he probably has no money to retire! A simple calculation will tell us so:
Gross monthly household income pm = $8000.
Take-home income pm after contributing to employee CPF = $6400.
Assume their CPF used to pay instalment = $1600,
and cash used to pay instalment = $3377 - 1600 = $1777,
then left money in pocket = $6400 - $1777 = $4623.
Pay other instalment (credit card etc) $1000, left money in pocket pm = $3623.
Other Household expenses pm probably about = $3500,
so money saved pm only about = $123 (vs expenses per month = $4500 !)
Wow! Like that forever must work until die also has not enough savings to retire!
Ultimately, the person has to cash out of the property to fund retirement and downgrade to studio or resort to renting (hope their money for rental can last until they passed away)..............

[teddybear]

Pinpoint specific household income amounts available to HDB upgraders is also not difficult because of the law of large numbers, we still can get good estimates!

You just need to look at Table 17 of the 2014 Household Income report:

Income 2014 2014 (cumulative %)
Below 1,000 2.4 12.8
1,000 - 1,999 6.7 19.5
2,000 - 2,999 6.7 26.2

3,000 - 3,999 7.0 33.2
4,000 - 4,999 6.8 40
5,000 - 5,999 6.7 46.7

6,000 - 6,999 6.1 52.8
7,000 - 7,999 5.7 58.5
8,000 - 8,999 5.2 63.7

9,000 - 9,999 4.7 68.4
10,000 - 10,999 4.0 72.4
11,000 - 11,999 3.3 75.7

12,000 - 12,999 3.1 78.8
13,000 - 13,999 2.5 81.3
14,000 - 14,999 2.3 83.6

From above, you can see that the 63.7 percentile household income is $8000 pm.
You can see that the 78.8 percentile household income is is $12,000 pm.
These are mostly the potential HDB upgraders, whose gross household income is $8,000 to $12,000 pm!

As HDB upgraders, they are actually only eligible to obtain loan at 50% of the property price according to TDSR (if they buy a 2nd property without selling their HDB flat)!
See, it is obvious that TDSR killed the HDB upgraders' dream of easily upgrading to private properties!

Never mind, we can assume they are willing to sell their HDB flats within 6 months etc and get 80% loan, so,
at $8000 pm, max loan eligible = $655,217 or max property price = $$819k.
at $12,000 pm, max loan eligible = $1069k or max property price = $1336k.

Now, let's look at the current price of a 3 bedroom OCR private condo about 1200 sqft. Now OCR private condo price is easily $1200 psf, or $1.44M total.
So, how many HDB upgraders are able to pass TDSR to buy a $1.44M OCR private condo?
Answer: Not many.

How many HDB upgraders are able to pass TDSR to buy a $1.44M OCR private condo and still able to save enough to retire at 65 years old at that kind of household income?
Answer: Even much fewer.

Conclusion: OCR private properties at $1200 psf are SERIOUSLY OVER-PRICED for HDB upgraders!
Even if they can pass TDSR to buy, they will have no ability to retire at 65 years old and still can afford to live in that private property!

And how many of these PMETs (who can earn household income of $8000-$12000 pm) today can work until they retire at 65 years old?
As far as I know, not many. Most will probably get retrenched at least once when they hit over 50 years old.
Some may find get structurally jobless while others will get almost 50% pay cut to secure another job (and hence their pay drop much below the initial private property affordability calculation)!

Buddy Ilikeu table already shows it clearly. Even sorted by age. And different quantum some more.

What is more difficult is to pinpoint the specific amounts available for upgraders.

But individually people can already make their own conclusions based on that table.

Sorry lah I salaried employee so need to work to protect my income. Very chui after work leh.

Analysis will take time for me. Anyone can chip in actually. Yourself included.

[Kelonguni]

Thank you Sir Teddy for dwelling deep in it. I had wanted to give you a good night sleep so did not reply.

Now let me add on to provide more clarity on your figures.

1. Now, you had put 20 years loan as tenure. Is there a good reason, such as the upgraders were about 45 years old such that their loans can only be until 65 years old? Here I will use your conservative 8K per month figure. Assuming it is composed of 2 equal salaries that began at 2K 20 years ago (1995), annual increment of 3.5%. This is actually population median figure instead of 60+ percentile, as our current median (individual) is already $3,9XX. But we will use your figures. and pretend they are at the 60th percentile (which they are not).

If the upgraders were 45 years old, they could have had 1 bite or 2 bites of the cherry.

If they had 1 bite only, their HDB loan is likely to be redeemed or close to being redeemed. The HDB should have been bought in 1995 to 2000 (people tended to get married before 30s then).

If they have had 2 bites, their second property should also be able to be fully redeemed with the gains from the first.

Assuming an average HDB (outskirts) bought before 2005 (at 200K), the equity gained is minimum 200K, with current selling price at 400K.

Now we dwell into their equity gained from their HDB and CPF plus cash savings accumulated over the years. This amount, depending on whether they spent most of the money earned or saved and reinvested most of it, will vary largely.

Assuming they only had 1 HDB bought in 1995 and taken 20 years loan, their CPF is enough to cover the loan throughout. In fact, they had a surplus of something like 100K OA CPF accumulated in 2015 after fully paying up their HDB loan.

Ignoring that 100K OA CPF (and also ignoring the SA funds accumulated), the HDB can now be sold for 400K to finance the upgrade.

2. I have mentioned that HDB upgraders are mostly only keen in outskirts. The last I searched below,
http://propertycarrots.com/search/

Latest prices of
Skypark Residence (122sqm) is 1.15M (875PSF EC)
Sol Acres (91sqm) is 733K (748PSF EC)
The Minton (109sqm) is 1.05M (895PSF Condo)

Just randomly grabbed some decent sized units.

Nobody said must be 1200PSF and must be large. The upgraders can decide how much space they need.

Quoting your figures,
"at $8000 pm, max loan eligible = $655,217 or max property price = $$819k.
at $12,000 pm, max loan eligible = $1069k or max property price = $1336k."

Plus 400K from CPF resale and 100+K CPF on standby, plus cash savings. They can put easily put 500K+++ equity into their next purchase and borrow 500K (for the 8K upgraders).

Lots of possibilities no?

[Ilikeu]

How much is needed for retirement (say at age 65) lumpsum or monthly, in your opinion? Then we would know whether the individual can retire. Retirement amount is very subjective.

[Ilikeu]

Now teddy has added in $1000 monthly payment for credit card... so I will include that in bearing in mind the TDSR takes into account monthly recurring installments payable to financial institutions, not add-hoc spendings.

So, I have now add in another table for reference, with assumption that upgraders have sufficient cash + CPF for 20% downpayment + stamp duties; plus $1,000 recurring monthly installment. It is still clear they (say $12k or less) can upgrade to OCR ppty costing $800k to say $1.6m depending on their age. In addition, there is no income ceiling for OCR buyers, so many more earning $12k or more or foreigners can buy, which will further support the pricing.

If everyone earning $8k or more can upgrade to private ppty, then the latest statistics of public housing dwellers of 80.1% will drop further. That explains why only 20% or so can stay in private housing.







TDSR 60%
Interest 3.50%
Loan Tenor Up to 65 years old
Loan 80%
Assume Buyers have sufficient cash + CPF for 20% downpayment + stamp duties; plus $1,000 recurring monthly installment

Price
$7,177.21 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000
Age 30 $6,075 $7,177 $8,279 $9,381 $10,484 $11,586 $12,688
32 $6,212 $7,349 $8,485 $9,622 $10,758 $11,894 $13,031
34 $6,369 $7,545 $8,721 $9,896 $11,072 $12,248 $13,423
36 $6,550 $7,771 $8,992 $10,213 $11,434 $12,655 $13,875
38 $6,760 $8,034 $9,307 $10,581 $11,854 $13,127 $14,401
40 $7,007 $8,342 $9,677 $11,012 $12,347 $13,682 $15,017
42 $7,299 $8,707 $10,115 $11,523 $12,931 $14,339 $15,747
44 $7,650 $9,146 $10,641 $12,137 $13,633 $15,129 $16,624
46 $8,078 $9,681 $11,284 $12,887 $14,490 $16,093 $17,696
48 $8,612 $10,348 $12,084 $13,821 $15,557 $17,293 $19,029
50 $9,292 $11,198 $13,105 $15,011 $16,918 $18,824 $20,730

Thank you Sir Teddy for dwelling deep in it. I had wanted to give you a good night sleep so did not reply.

Now let me add on to provide more clarity on your figures.

1. Now, you had put 20 years loan as tenure. Is there a good reason, such as the upgraders were about 45 years old such that their loans can only be until 65 years old? Here I will use your conservative 8K per month figure. Assuming it is composed of 2 equal salaries that began at 2K 20 years ago (1995), annual increment of 3.5%. This is actually population median figure instead of 60+ percentile, as our current median (individual) is already $3,9XX. But we will use your figures. and pretend they are at the 60th percentile (which they are not).

If the upgraders were 45 years old, they could have had 1 bite or 2 bites of the cherry.

If they had 1 bite only, their HDB loan is likely to be redeemed or close to being redeemed. The HDB should have been bought in 1995 to 2000 (people tended to get married before 30s then).

If they have had 2 bites, their second property should also be able to be fully redeemed with the gains from the first.

Assuming an average HDB (outskirts) bought before 2005 (at 200K), the equity gained is minimum 200K, with current selling price at 400K.

Now we dwell into their equity gained from their HDB and CPF plus cash savings accumulated over the years. This amount, depending on whether they spent most of the money earned or saved and reinvested most of it, will vary largely.

Assuming they only had 1 HDB bought in 1995 and taken 20 years loan, their CPF is enough to cover the loan throughout. In fact, they had a surplus of something like 100K OA CPF accumulated in 2015 after fully paying up their HDB loan.

Ignoring that 100K OA CPF (and also ignoring the SA funds accumulated), the HDB can now be sold for 400K to finance the upgrade.

2. I have mentioned that HDB upgraders are mostly only keen in outskirts. The last I searched below,
http://propertycarrots.com/search/

Latest prices of
Skypark Residence (122sqm) is 1.15M (875PSF EC)
Sol Acres (91sqm) is 733K (748PSF EC)
The Minton (109sqm) is 1.05M (895PSF Condo)

Just randomly grabbed some decent sized units.

Nobody said must be 1200PSF and must be large. The upgraders can decide how much space they need.

Quoting your figures,
"at $8000 pm, max loan eligible = $655,217 or max property price = $$819k.
at $12,000 pm, max loan eligible = $1069k or max property price = $1336k."

Plus 400K from CPF resale and 100+K CPF on standby, plus cash savings. They can put easily put 500K+++ equity into their next purchase and borrow 500K (for the 8K upgraders).

Lots of possibilities no?

[Kelonguni]

Quoting your figures,
"at $8000 pm, max loan eligible = $655,217 or max property price = $$819k.
at $12,000 pm, max loan eligible = $1069k or max property price = $1336k."

Plus 400K from CPF resale and 100+K CPF on standby, plus cash savings. They can put easily put 500K+++ equity into their next purchase and borrow 500K (for the 8K upgraders).

Correction: I meant "HDB resale"

[Kelonguni]

How much is needed for retirement (say at age 65) lumpsum or monthly, in your opinion? Then we would know whether the individual can retire. Retirement amount is very subjective.

Because it is subjective, the amount can vary widely. The savings habit of the upgraders is also crucial in this equation.

As highlighted in the D'Leedon thread, selling HDB and directly upgrading to EC or PC is not the only option, even though it is a viable one.

At this income (8K) and age level (45), it is a bit risky to go for higher loans (say more than 500K), because CPF OA contribution drops significantly at age 55. The highest property value this profile should aspire for is 400K (HDB sale) + 100K (CPF) + 500K (loan) = $1M. A safe level is to look for resales under 900K or ECs at 700K or so.

But remember that we are constrained by Teddy's conditions in this computations. Loans can go up to 30 or 35 years, and the upgraders we are referring to could also be higher income, much more cash and CPF rich, or much younger.

[teddybear]

When we talk about HDB upgraders, they are mostly at between 40-50 years old, and they most likely have a family with at least 1 or more kids, with a maid, and some even living with parents!
Given a family like that, they need at least a 3 bedroom house of at least 1200 sqft! Anything below that I can imagine..... How to squeeze into a house <1200 sqft like that???
Also, from what I can see, a 3 bedroom condo really needs at least 1200 sqft in order not to give people claustrophobia!

"Loans can go up to 30 or 35 years"?
A person at 45 years old, can he still get 30 years loan and still borrow 80% of the property price??? Don't think so!

If you look at my calculations, you already know that few HDB upgraders can genuinely "AFFORD" to upgrade and still have money to retire at 65 years old (and they are also counting too far and they are assuming that they can still earn that kind of money past 50 years old to 65 years old!). Fact is, most will likely face retrenchment at least once past 50 years old and have income cut by half or more.........

Because it is subjective, the amount can vary widely. The savings habit of the upgraders is also crucial in this equation.

As highlighted in the D'Leedon thread, selling HDB and directly upgrading to EC or PC is not the only option, even though it is a viable one.

At this income (8K) and age level (45), it is a bit risky to go for higher loans (say more than 500K), because CPF OA contribution drops significantly at age 55. The highest property value this profile should aspire for is 400K (HDB sale) + 100K (CPF) + 500K (loan) = $1M. A safe level is to look for resales under 900K or ECs at 700K or so.

But remember that we are constrained by Teddy's conditions in this computations. Loans can go up to 30 or 35 years, and the upgraders we are referring to could also be higher income, much more cash and CPF rich, or much younger.

[Kelonguni]

To be absolutely frank with you, ALL the upgraders I know made the move between 35 to 40. 95% are regular salaried employees. I can give you another set of calculations if you are keen.

The above 40s are second private or private to private movements.

When we talk about HDB upgraders, they are mostly at between 40-50 years old, and they most likely have a family with at least 1 or more kids, with a maid, and some even living with parents!
Given a family like that, they need at least a 3 bedroom house of at least 1200 sqft! Anything below that I can imagine..... How to squeeze into a house <1200 sqft like that???
Also, from what I can see, a 3 bedroom condo really needs at least 1200 sqft in order not to give people claustrophobia!

"Loans can go up to 30 or 35 years"?
A person at 45 years old, can he still get 30 years loan and still borrow 80% of the property price??? Don't think so!

If you look at my calculations, you already know that few HDB upgraders can genuinely "AFFORD" to upgrade and still have money to retire at 65 years old (and they are also counting too far and they are assuming that they can still earn that kind of money past 50 years old to 65 years old!). Fact is, most will likely face retrenchment at least once past 50 years old and have income cut by half or more.........

[teddybear]

Response to your query:

1. 20 years loan is because of 45 years old assumption. TDSR mandates that you can borrow 80% of your first property provided the loan is up to max of 65 years old. Beyond that, you can only borrow 60% (or 50%?) of property price.
45 years old is also quite a valid assumption, because statistics show that most people have household income of $8k to $12k per month at 40 to 50 years old.

Remember, the $8k gross household income is from the 2014 household income report provided by the government!
This cannot be wrong, only that it does not include employers' CPF contribution, which makes sense since TDSR computation will not include employers' CPF contribution as income anyway!

Regarding their profits from their HDB flats etc, we can just assume those will be used for paying downpayments (which I did not include). Anyway, not every HDB graders would have profited from their first HDB flats (and they have no 2nd cherry without paying the 25% levy!).

2. As I mentioned, 1200 sqft 3 bedroom condo is necessary for HDB upgraders' whole family. For some, it may even be too small!

3. My calculation already showed that most HDB upgraders won't have enough money to retire at 65 years old if they buy a OCR private condo at >$1M (and don't ask them to buy mickey mouse unit unless they have magic to shrink their family to mickey mouse size!)..............

Thank you Sir Teddy for dwelling deep in it. I had wanted to give you a good night sleep so did not reply.

Now let me add on to provide more clarity on your figures.

1. Now, you had put 20 years loan as tenure. Is there a good reason, such as the upgraders were about 45 years old such that their loans can only be until 65 years old? Here I will use your conservative 8K per month figure. Assuming it is composed of 2 equal salaries that began at 2K 20 years ago (1995), annual increment of 3.5%. This is actually population median figure instead of 60+ percentile, as our current median (individual) is already $3,9XX. But we will use your figures. and pretend they are at the 60th percentile (which they are not).

If the upgraders were 45 years old, they could have had 1 bite or 2 bites of the cherry.

If they had 1 bite only, their HDB loan is likely to be redeemed or close to being redeemed. The HDB should have been bought in 1995 to 2000 (people tended to get married before 30s then).

If they have had 2 bites, their second property should also be able to be fully redeemed with the gains from the first.

Assuming an average HDB (outskirts) bought before 2005 (at 200K), the equity gained is minimum 200K, with current selling price at 400K.

Now we dwell into their equity gained from their HDB and CPF plus cash savings accumulated over the years. This amount, depending on whether they spent most of the money earned or saved and reinvested most of it, will vary largely.

Assuming they only had 1 HDB bought in 1995 and taken 20 years loan, their CPF is enough to cover the loan throughout. In fact, they had a surplus of something like 100K OA CPF accumulated in 2015 after fully paying up their HDB loan.

Ignoring that 100K OA CPF (and also ignoring the SA funds accumulated), the HDB can now be sold for 400K to finance the upgrade.

2. I have mentioned that HDB upgraders are mostly only keen in outskirts. The last I searched below,
http://propertycarrots.com/search/

Latest prices of
Skypark Residence (122sqm) is 1.15M (875PSF EC)
Sol Acres (91sqm) is 733K (748PSF EC)
The Minton (109sqm) is 1.05M (895PSF Condo)

Just randomly grabbed some decent sized units.

Nobody said must be 1200PSF and must be large. The upgraders can decide how much space they need.

Quoting your figures,
"at $8000 pm, max loan eligible = $655,217 or max property price = $$819k.
at $12,000 pm, max loan eligible = $1069k or max property price = $1336k."

Plus 400K from CPF resale and 100+K CPF on standby, plus cash savings. They can put easily put 500K+++ equity into their next purchase and borrow 500K (for the 8K upgraders).

Lots of possibilities no?

[teddybear]

How much depends on what is the necessities and the style of livings...........

We can use Government's household expenditures survey as a guide (see the link).........

The 2013 household expenditure statistics tell us that those household earning $6-8k pm spend average of $3957 pm.

While the household earning $10-12k PM spend average of $5488 pm.

Assuming that these people want to retain their life-style when they retire, they will still need to spend close to these figures (minus some kids' expenses but have to add higher medical expenses, which we assume to balance)...........

How much is needed for retirement (say at age 65) lumpsum or monthly, in your opinion? Then we would know whether the individual can retire. Retirement amount is very subjective.

[teddybear]

Let's assume that a couple is 45 years old now and want to retire at 65 years old (hopefully before getting retrenched and jobless and can't find similar paying jobs), and they want to maintain today's life style at $3957 pm.

If you assume average of 3% inflation per year (a reasonable assumption) over next 20 years, then they will need to spend $7205 pm when they are 65 years old.

Say they need $7205 pm every year for 20 years, then they will need to have saved about $1.73M in order to retire at 65 years old and still maintain their life style at today's value of $3957 pm.
Mind you, $3957 pm is for a couple (i.e. 2 person), or about $2000 pm per person, which is already very thrifty indeed!!!!!!!!!

Now, you may say their $1.73M can grow right?
Yes, but we also have not included inflation!
Because most people can't invest their money well, so we can just assume that the 3% inflation every year thereby is compensated by their meagre returns of 3% p.a. (hopefully!).

How many HDB upgraders are able to accumulate $1.73M at 65 years old and still maintain their life-style when they retire and still live in their private property????

How much depends on what is the necessities and the style of livings...........

We can use Government's household expenditures survey as a guide (see the link).........

The 2013 household expenditure statistics tell us that those household earning $6-8k pm spend average of $3957 pm.

While the household earning $10-12k PM spend average of $5488 pm.

Assuming that these people want to retain their life-style when they retire, they will still need to spend close to these figures (minus some kids' expenses but have to add higher medical expenses, which we assume to balance)...........

How much is needed for retirement (say at age 65) lumpsum or monthly, in your opinion? Then we would know whether the individual can retire. Retirement amount is very subjective.

[Ilikeu]

Kelonguni bro, let me summarize for you teddybear's definition or game rules for upgraders

1. 40-50 years old, assume mean 45 years old, hence only 20 years loan tenor to borrow 80%
2. Family with at least 1 or more kids, with a maid, and some even living with parents
3. Upgrade to at least 1200sqft OCR = about $1.44m condo required
4. Household income $8000-12000 per month
5. Recurring monthly expense $1,000 per month (that will reduce TDSR)
6. Retirement amount (at age 65) requires $3957 to $5488 per month (less off kids expenses but add on higher medical cost = balance). Hence assume mean $4,722.50 per month. Let's say can live up to 85 years old, means $1.133m (=$4,722.50 x 12 x 20 years without considering future value) of retirement amount.

To me, that is just a subset of public housing dwellers who aim to upgrade...

All the numbers being quoted are "average" by teddybear (which I did not take the trouble to verify). From this alone, it is hence very clear that is why only 19.9% stays in privates only. If all those from "average" or "median" rankings can afford privates, then you will see close to 50% in privates.

[Ilikeu]

Wow... $1.73m in cash (plus a private ppty fully paid) then can retire!
I don't know how old you are... I'm wondering if your parents require $4k per month after they retired?

Let's assume that a couple is 45 years old now and want to retire at 65 years old (hopefully before getting retrenched and jobless and can't find similar paying jobs), and they want to maintain today's life style at $3957 pm.

If you assume average of 3% inflation per year (a reasonable assumption) over next 20 years, then they will need to spend $7205 pm when they are 65 years old.

Say they need $7205 pm every year for 20 years, then they will need to have saved about $1.73M in order to retire at 65 years old and still maintain their life style at today's value of $3957 pm.
Mind you, $3957 pm is for a couple (i.e. 2 person), or about $2000 pm per person, which is already very thrifty indeed!!!!!!!!!

Now, you may say their $1.73M can grow right?
Yes, but we also have not included inflation!
Because most people can't invest their money well, so we can just assume that the 3% inflation every year thereby is compensated by their meagre returns of 3% p.a. (hopefully!).

How many HDB upgraders are able to accumulate $1.73M at 65 years old and still maintain their life-style when they retire and still live in their private property????

[teddybear]

The statistics tell us that if the HDB upgraders are going to buy a $1M property and still want to maintain their life-style when at 65 years and after, they just CAN'T retire at 65 years old!

But they have an option: Sell their property and downgrade......
But that is provided that asset inflation persists.............
If not, sayo nara......... They can choose to work till they die if they still have the energy and the health to do so............

Wow... $1.73m in cash (plus a private ppty fully paid) then can retire!
I don't know how old you are... I'm wondering if your parents require $4k per month after they retired?