In my previous article “Are Singaporean really that rich?”, we discussed on the general affordability for property. The numbers presented in that article accounts for both HDB property as well as private property. In addition, the income used for the various calculations is the median income.
In this article, I will be looking at the top 10 to 30% of income of residents in Singapore. By looking from the perspective of their income, I will calculate if they can easily afford to buy a private condo.
Again, for the income figures, I look into one of the most reliable source of data – Singstats. From Singstats, here are the Average Monthly Household Income From Work Per Household Member (Dollar) in 2017. The income is broken down into the different decile.
Above: Real change in Average Monthly Household Income From Work Per Household Member Amony Resident Employed Households by Deciles, 2017 (Per Cent)
Do take note that the income presented here is the average household income from PER person. Therefore, assuming the husband and wife of a household are both working, then the total income from the household will be a larger one.
So what is roughly the property price that each Household member can afford?
From the income, I calculate how much loan would the Household member 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)
| Decile | Average Monthly Household Income From Work Per Household Member (Dollar) | TSDR based on 25 yrs loan | Property Price based on 75% loan |
| 1st Decile | $554.00 | $66,397.19 | $88,529.59 |
| 2nd Decile | $1,093.00 | $130,996.63 | $174,662.17 |
| 3rd Decile | $1,528.00 | $183,131.61 | $244,175.48 |
| 4th Decile | $1,958.00 | $234,667.34 | $312,889.78 |
| 5th Decile | $2,434.00 | $291,716.19 | $388,954.92 |
| 6th Decile | $2,994.00 | $358,832.49 | $478,443.31 |
| 7th Decile | $3,670.00 | $439,851.44 | $586,468.59 |
| 8th Decile | $4,629.00 | $554,788.10 | $739,717.47 |
| 9th Decile | $6,279.00 | $752,541.48 | $1,003,388.63 |
| 10th Decile | $13,215.00 | $1,583,824.75 | $2,111,766.33 |
From the calcuations above, looking at the top 20% of the income earners, they can afford a $1M dollar property or above. For those in the 8th decile, perhaps to buy a condo could be a stretch for them, depending on which location they intend to buy. Therefore it seems like only the top 20% of income earners can afford to buy a condo.
However, do note that the income here is per person in a household. If the household has 2 person working, combining their income will result in a better household affordability for property. If we draw reference to the table below, we can see that there are usually more the one person working and earning money among the resident household.
Above: Average Number of Working Persons Among Resident and Resident Employed Households by Deciles, 2007 – 2017
Say for example if in the 8th decile, assuming both husband and wife earn the same income, their combined income could help them afford 2 times the property price, that is $1.4M using the same calculation method above. Even for those with husband and wife earning the same income in the 7th decile, their combine income could help them afford a condo at around $1.17M.
Next, I take a look the average monthly household income of residents households below. In this chart below, it will show in each decile, how much will the average family income be.
Above: Average Monthly Household Income from Work Amony Resident Employed Households by Deciles, 2007 – 2017
| Decile | Average Monthly Household Income From Work Per Household Member (Dollar) | TSDR based on 25 yrs loan | Property Price based on 75% loan |
| 8th Decile | $15,976 | $554,788.10 | $2,551,537 |
| 9th Decile | $19,589 | $752,541.48 | $3,130,336 |
| 10th Decile | $31,806 | $1,583,824.75 | $5,082,621 |
Looking at the average income of the top 30% of the households, they can deifinitely afford a decent price and size of condo. Of course, the calcuation is based on 25 years loan tenure and 60% debt servicing ratio. The figures could be lower if the loan tenure is shorter of if the household decide to go for alower debt servicing ratio.
Other observation
There could be retirees or household who has already saved up enough or has already fully paid for their condo. In this case, even their income is low or zero, they had already accumulate enough for a condo or to buy a condo.
Conclusion
For the top 30% of the household income, they should be able to afford a condo easily. Here we can also observed that having more than one person contributing to the household income can greatly help in the affordability of the condo.
So is income the sole criteria that determine property affordability?
Household income is definitely one of the most important but NOT the only factor
In determining affordability, another important factor is the ability of the household in saving money. A high income household does not mean that the household has the ability to save money. As purchasing of property requires initial payment for downpayment, stamp duties etc. A household that does not have savings for these payments may not be able to afford to buy the property.
Conversely, if income earners in the lower decile are able to save money well, they may stand a good chance of buying a condo. In my line of work, I have seen many average income earners, being able to save and accumulate hundreds of thousands of dollars through consistent savings or investing. In turn, they can easily afford a condo or purchase a condo for investment.
Do take a look at my article on “The 3 financial decisions I made after reading The Richest Man in Babylon” if you want to find out how you can save well.