November 25, 2018 by John Cheng
Once in a while, my friend or my client will ask me if Singaporeans are really that rich? The showrooms seem to be packed and so many people are balloting for new launches.
From time to time, we do see in the news on condo units being snapped up, or how successful the new launches are, and what are the prices being sold at the launch. Sometimes it gives the impression that Singaporeans can really afford to buy condos.

Business times : 15th November 2018
Indeed, we have observed over the last few decades, there is an increase in home prices. The main question I will look into deeper here, are properties in Singapore still affordable? Or is a bubble forming and properties are actually very highly priced at the moment?
Here I will work on the basis that home prices is a function of the population’s income. The more income the family earns, the higher priced housing they can afford. Meaning, if you can afford to buy it, you can buy it.
Firstly, I searched for the information on Singaporean income. I took a look at probably one of the most reliable source – Singstats. Here I found the Median Monthly Household Income From Work Including Employer CPF Contributions (Dollar) over the years from 2000 to 2017.

Year Median Monthly Household Income From WorkIncluding Employer CPF Contributions (Dollar)
2000 $4,398.00
2001 $4,716.00
2002 $4,590.00
2003 $4,612.00
2004 $4,552.00
2005 $4,831.00
2006 $4,952.00
2007 $5,362.00
2008 $6,100.00
2009 $6,006.00
2010 $6,342.00
2011 $7,037.00
2012 $7,566.00
2013 $7,872.00
2014 $8,292.00
2015 $8,666.00
2016 $8,846.00
2017 $9,023.00
Source: singstats

So how do I make sense of these income figures?

From the income, I calculate how much loan would the family be able to take up with the financial institutions. I also assume here that the downpayment for property is 25%.

Some assumptions that I use for calculation here:
Loan tenure : 25 years
Interest rate: 3.5%
Loan servicing ratio: 60%
(using 60% of the income to service the mortgage)
Year Median Monthly Household Income From Work Loan eligible(25yrs loan tenure) Property Price based on75% loan
2000 $4,398.00 $527,102.63 $702,803.51
2001 $4,716.00 $565,215.10 $753,620.13
2002 $4,590.00 $550,113.93 $733,485.24
2003 $4,612.00 $552,750.64 $737,000.86
2004 $4,552.00 $545,559.61 $727,412.81
2005 $4,831.00 $578,997.91 $771,997.21
2006 $4,952.00 $593,499.82 $791,333.10
2007 $5,362.00 $642,638.54 $856,851.39
2008 $6,100.00 $731,088.23 $974,784.31
2009 $6,006.00 $719,822.28 $959,763.04
2010 $6,342.00 $760,092.06 $1,013,456.08
2011 $7,037.00 $843,388.18 $1,124,517.57
2012 $7,566.00 $906,789.11 $1,209,052.14
2013 $7,872.00 $943,463.37 $1,257,951.16
2014 $8,292.00 $993,800.59 $1,325,067.45
2015 $8,666.00 $1,038,624.69 $1,384,832.92
2016 $8,846.00 $1,060,197.78 $1,413,597.05
2017 $9,023.00 $1,081,411.33 $1,441,881.77

I observed over the years, due to the increasing income, the affordability for property has also increases. From the $702k in year 2000, and doubles to about $1.44M in 2017. Indeed the affordability of residents for housing has increased. It seems like we can really afford to purchase a decend sized condo here with $1.44M budget today.
However the assumptions here may not be totally accurate for everyone here. As some buyers may be older in age, and may not be eligible for 25 years loan tenure.
So I adjusted the loan tenure to 20 years now, and see what is the difference.
Year Median Monthly Household Income From Work Loan eligible(20yrs loan tenure) Property Price based on75% loan
2000 $4,398.00 $454,997.12 $606,662.82
2001 $4,716.00 $487,895.95 $650,527.94
2002 $4,590.00 $474,860.57 $633,147.42
2003 $4,612.00 $477,136.59 $636,182.11
2004 $4,552.00 $470,929.26 $627,905.68
2005 $4,831.00 $499,793.33 $666,391.11
2006 $4,952.00 $512,311.44 $683,081.92
2007 $5,362.00 $554,728.18 $739,637.58
2008 $6,100.00 $631,078.31 $841,437.75
2009 $6,006.00 $621,353.50 $828,471.33
2010 $6,342.00 $656,114.53 $874,819.38
2011 $7,037.00 $728,016.08 $970,688.11
2012 $7,566.00 $782,744.02 $1,043,658.69
2013 $7,872.00 $814,401.39 $1,085,868.52
2014 $8,292.00 $857,852.68 $1,143,803.58
2015 $8,666.00 $896,545.03 $1,195,393.37
2016 $8,846.00 $915,167.01 $1,220,222.68
2017 $9,023.00 $933,478.62 $1,244,638.17
Here we see the affordability falls to around $1.24M.

So why are these two figure important?

As these are the number calculated based on the maximum loan that a famiy can get from the bank and the supposed maximum property price based on 25% downpayment. Therefore if a property that is priced much higher than these 2 median numbers, it may mean that it is generally out for reach for buyers here.
Of course, the numbers above are based on 60% loan servicing ratio. Which maybe a bit high for some families. Therefore I took a more conservative approach by assuming now, the loan servicing ratio of 30% instead and loan tenure of 20 years.
How will the number looks like?
Year Median Monthly Household Income From Work Loan eligible(20yrs loan tenure) Property Price based on75% loan
2000 $4,398.00 $227,498.56 $303,331.41
2001 $4,716.00 $243,947.98 $325,263.97
2002 $4,590.00 $237,430.28 $316,573.71
2003 $4,612.00 $238,568.29 $318,091.06
2004 $4,552.00 $235,464.63 $313,952.84
2005 $4,831.00 $249,896.67 $333,195.55
2006 $4,952.00 $256,155.72 $341,540.96
2007 $5,362.00 $277,364.09 $369,818.79
2008 $6,100.00 $315,539.16 $420,718.87
2009 $6,006.00 $310,676.75 $414,235.67
2010 $6,342.00 $328,057.27 $437,409.69
2011 $7,037.00 $364,008.04 $485,344.05
2012 $7,566.00 $391,372.01 $521,829.35
2013 $7,872.00 $407,200.69 $542,934.26
2014 $8,292.00 $428,926.34 $571,901.79
2015 $8,666.00 $448,272.51 $597,696.68
2016 $8,846.00 $457,583.50 $610,111.34
2017 $9,023.00 $466,739.31 $622,319.08

From the numbers here, the median affordability of housing in Singapore seems to suggest it to be at $622k. In this case, it seems like condo prices are really out of reach. Then how come the showrooms are still packed and people are still buying condo?

My Thoughts

The calculations above done is to estimate the general affordability for property. This includes HDB property as well as private property. The income used here is the median income. I suppose the top 30% income earner here can afford a condo or private property.
Therefore in the next article, I will do a more detail breakdown and calculations on the different based on the different incomes levels. I think if we really break down and look at the top earners and bottom earners, the affordability may looks totally different.
Stay tuned and look out for the next article to have a clearer picture!