Couple snag affordable unit after two-year quest

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#1
If you just look at the headlines, it would seem "affordable" for this couple. But note that the cost of the flat (at $340,000) is nearly 8x of their household annual income of $42,000. I am not sure how they can measure affordability this way....Huh

Dec 4, 2010
Couple snag affordable unit after two-year quest


CIVIL servant Kelvin Teo and his wife have been looking for their dream home for almost two years.

But the experience was discouraging, with flat sellers wanting high cash amounts upfront, also known as cash-over-valuation (COV).

But that was before Aug 30, when cooling measures kicked in. These have shifted market dynamics in the couple's favour.

Mr Teo, 28, and his wife Alberta, 21, finally snagged a four-room unit in Bukit Panjang in September for $340,000. The price included a low $11,000 premium.

They preferred resale flats over new ones because those under the HDB's build-to-order (BTO) scheme typically take three years to finish, a wait they felt was too long.

Said Mr Teo: 'The major hindrance was the COV. Flipping through the papers, I could see some of the numbers were getting ridiculous, at more than $50,000.'

They grabbed the four-room flat in Bangkit Road when it came along. 'Though it was more than 20 years old, it was decent and something we could afford,' he said.

The couple, who have a seven-month-old son and a monthly household income of less than $3,500, also had additional help from the Government in the form of a $50,000 housing subsidy.

Mr Teo said the measures to curb speculation in the resale market had helped: 'Before the new measures, high COVs were common. But now I see maybe about three out of 10 sellers demanding a COV of less than $15,000. And that's a good sign.'

DARYL CHIN
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#2
(05-12-2010, 05:00 PM)Musicwhiz Wrote: If you just look at the headlines, it would seem "affordable" for this couple. But note that the cost of the flat (at $340,000) is nearly 8x of their household annual income of $42,000. I am not sure how they can measure affordability this way....Huh

What is the rule of the thumb for a normal ratio?

This article seems unconvincing

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#3
(05-12-2010, 09:19 PM)EnSabahNur Wrote: What is the rule of the thumb for a normal ratio?

This article seems unconvincing

In an article written by Mah Bow Tan back on Nov 12, 2010 and published in TODAY, it was mentioned that the price to income ratio (HPI) in Singapore for resale flats is 5.8x. In Hong Kong, it is 19.8 and London, it is 7.1. However, it was also mentioned that for younger couples (of which this is one clear example), the ratio is even lower at 4.5x. So this example is not convincing as the couple's ratio is close to 8x.
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#4
(05-12-2010, 10:45 PM)Musicwhiz Wrote: In an article written by Mah Bow Tan back on Nov 12, 2010 and published in TODAY, it was mentioned that the price to income ratio (HPI) in Singapore for resale flats is 5.8x. In Hong Kong, it is 19.8 and London, it is 7.1. However, it was also mentioned that for younger couples (of which this is one clear example), the ratio is even lower at 4.5x. So this example is not convincing as the couple's ratio is close to 8x.

Pichak lobang!! Big Grin


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#5
Wow I just re-read the article again and I realized I missed something. The couple got the flat at $340,000 AFTER a $50,000 subsidy, which means it would have cost $390,000 without the subsidy. This is for a 20-year old flat somewhere in Bukit Panjang, not the most accessible of places!

And upon further reading, their household income is LESS than $3,500 per month.

This would mean the HPI could potentially come close to 10x assuming they earn say $3,200 a month ($38,400 per annum) and the REAL COST of the HDB flat was $390,000. Undecided
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#6
The low monthly income of $3500 could be only the guy is working now while the gal is still studying...

Once the gal completes her study, the monthly household income will probably double..

Otherwise, they must be crazy to take up a resale $340k flat with COV element...

Currently, my GF and I (Combined income of merely 8k) considers only BTO flats...
Because COV is ridiculous..
And we balloted for a 4-rm flat in punggol for $280k..
And we even find that expensive !!!



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#7
(05-12-2010, 11:40 PM)Zelphon Wrote: The low monthly income of $3500 could be only the guy is working now while the gal is still studying...

Once the gal completes her study, the monthly household income will probably double..

I agree with you; the girl is just 21 and thus may not be working yet. Then again, she is only 21 but has a child, so she may or may not join the workforce. Even if she does, then she needs a caregiver like a maid or nanny (or her own parents or parents in law) which will then incur more costs as well. So even though household income may rise if she takes a job, household expenses would rise in tandem.

Hence the affordability factor may diminish in light of this as well.
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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