HDB flats seem to be priced many times my annual income. How can I afford one?
HDB offers a wide variety of flat types in various areas across Singapore at different times of the year. You should be able to find a suitable flat priced within your means.
Some measures of housing affordability use the Home Price-Income ratio (HPI), where a figure of 6, for instance, would indicate that the property being purchased is priced at six times the buyer’s current annual income.
There is no international consensus on what figure signifies whether a property is affordable or not. In some leading international cities, such as Hong Kong or London, the HPI could be quite high, with some sources putting the HPI for Hong Kong in the double digits. In other countries, in areas away from centres of population or economic activity, the HPI could be lower.
In Singapore, HDB uses the Debt Servicing Ratio, or DSR as a more accurate indicator of actual housing affordability. The DSR refers to the proportion of the monthly household income set aside for housing instalments..
This measurement takes into account interest payments, which the HPI does not. It is calculated on an assumed 30 year loan, and the figure would rise if the loan tenure were shortened. Correspondingly, a working household may reasonably expect salary increases over time, and, assuming a fixed tenure period, the actual DSR in later years of repayment may fall.
HDB’s commitment to Singaporean households centres on the provision of new BTO flats. A typical first-time home buyer of a new flat in a non-mature estate used on average, less than a quarter of their monthly income (at the point of application) to pay for their housing loans. This means that most buyers are able to pay for their monthly instalments using CPF, with no or minimal cash outlay.
Table 1: DSR for New HDB Flats Offered in Non-Mature Estates in 2012
New Flat Selling Price in 2012
Median Household Income of Applicants
Eligible Additional CPF Housing Grant (AHG)
Eligible Special CPF Housing Grant (SHG)
Nett Selling Price (Less Grants)
Monthly Instalment for Mortgage Loan
Monthly Instalment to Income Ratio
1. Selling prices are based on new flats offered in 2012 in non-mature estates.
2. Median household income is based on first-timer applicants in 2012 in non-mature estates.
3. Monthly mortgage instalments based on concessionary interest rate of 2.6% over 30 years.
4. The Additional CPF Housing Grant (AHG) and Special CPF Housing Grant (SHG) are used to offset the 90% maximum loan where applicable, assuming that buyers have sufficient savings for the 10% downpayment.
5. The stamp, conveyancing and other fees payable to buy a flat are not included in the table above.
For example, a buyer, with a lower monthly income of $2,500 may opt for a smaller 3-room flat in a non-mature estate, to be financially prudence. This buyer will only need to come up with a very minimal cash outlay of $4 for the monthly instalments.
The DSR levels for new HDB flats is set well within the acceptable international affordability benchmarks of 30-35 percent. With generous and targeted grants for the lower income, the typical buyers of smaller 2- and 3-room flats can enjoy a lower DSR, some with zero cash outlay.
While HDB works to ensure that new BTO flats are priced within reach of most working Singaporean families, individual households also need to adopt a prudent approach, and look for flat options that are within their means, after taking into account their other financial commitments over the long term.