09 October 2017

Home Ownership Is More Expensive Than You Think

Purchasing your first ever property in Singapore is a significant milestone especially for young Singaporean adults. Planning to buy a BTO and step into another milestone in life? Are you planning to buy your first property in Singapore but with the expensive price of a HDB flat, you cannot afford to buy one just yet. You tried checking online for HDB flats for sale or condominium in Bukit Batok but they are expensive as well and it would be a financial burden for you if you were to buy it. You often hear about people complaining about the huge expenses they spent after buying a home. With so many factors to consider before buying your first property in Singapore, this article will tell you how home ownership is more expensive thn you think

First of all, the cost of owning a home is more than its selling price. Think about the costs that you have to bear after paying the huge amount for down payment:

1. Renovation cost

After getting the keys to your home, the first thing that comes to your mind will be home renovation. And home renovation might cost more than what you expect, even if it is only a basic simple renovation. There are lots of renovation items that will cost you a lot after you itemize them, such as the lighting fixtures, curtains, air conditioners units, bathroom accessories, electrical works, window grills, cement screeding, painting, haulage fee and more micellaneous fee that will add up to a huge amount after you are done with the renovation. Sure you are allowed to take those articles with title “renovating your home with less than $30,000” for reference, but do read article like this with a pinch of salt as most of them do not include furnishing costs such as the beautiful furniturethat you see from the article. In addition, simple fixutre such as the lighting is not included in their renovation costs as well. 

Therefore, do set aside of $50,000 at least for the renovation of your entire home, or at least $70,000 if you plan to follow the renovation from the articles that you have read online.

2. Interest cost

Let us assume a case scenario. Let us say if someone buys a HDB flat at $400,000 and has paid a 10% down payment, which is equivalent to $40,000. After paying the down payment, the buyer will still need a loan of $360,000. Assuming the buyer is taking a 20 years loan with a loan interest rate at 2.6% per annum, the total cost of the home is more than just $400,000. The table below will show you how it works out to more than $400,000.

Price of HDB flat
Loan applied
Repayment (monthly)
Repayment (total)
Total cost of HDB flat

Based on the table above, a HDB flat with $400,000 selling price would cost you approximately $500,000 after you include the bank interest cost, but not including the renovation cost.

3. Opportunity cost

Bear in mind that the moment you buy a house or a condominium in Bukit Batok, you are actually letting go some good opportunity that might be even better than owning a home. This is one of the few options that people will ever consider when they purchase a property in Singapore. Most Singaporeans have failed to realize that the huge amount of money they spent in buying a property could have been used to generate returns if they were to invest in other investing channels. 

Based on the scenario mentioned above, let us say if the home buyer uses the renovation cost of $50,000 and down payment of $40,000 in the Singapore Savings Bond, a risk free asset, with a 2.5% return per annum. Assuming the home buyer uses the $90.000 for the investment with 2.5% annual return, the home buyer would have a total of $147,475 after 20 years including the compounding interest. In addition, if the home buyer uses the additional $1,925 that is meant for monthly loan repayment on the the same investment with 2.5 annual return, the home buyer will then have a whooping $598,626 after 20 years. That being said, if the home buyer spends the money on investment instead of purchasing a property, he will then have a total of $598,626 after 20 years. 

Do bear in mind that you the cost of buying a house is not only $400,000 as there is also renovation cost to take into account. Therefore, it would be a total of $552,000 and that would be the actual cost of buying a house, not including maintenance fee. That being said, the home buyer should not be too happy when he is able to sell the house for $600,000. Think of the opportunity cost that he has missed out on when buying a house. A total of $746,101 could have been his if it was not because of buying a house. Of course, if the home buyer bought the house for investment purpose, meaning to say, renting it out, that will then be a valid reason in arguing that it will have a higher return as compared to investing in risk free assets. 

In conclusion, owning a property is still considered a great financial decision, especially to young working adults in Singapore. However, do bear in mind that owning a house is actually more expensive than what most people expect


  1. Erm, kesian pada yang tak ada rumah lagi macam saya ni... hutan pun dah habis kena tebang... sadis...

  2. Mahalnya cost rumah kat situ. Reno pun dah 70k

  3. mahalnya kos.. hurmmm.. nak beli rumah untuk akan datang macam mana la nanti..


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