A $1 million HDB flat is a rarity in the past. But in recent years, more $1 million HDB transactions have been recorded and reported in the news. In fact, one of the most expensive HDB flats in Singapore fetched a staggering $1.5 million.

This leaves me wondering – **how much are these people earning to be able to afford a $1 million HDB flat in Singapore? **

**The Maths**

Let’s break down the math together. In the below scenario, we will be making a few assumptions and working backward to calculate the income required for you to afford a $1 million HDB in Singapore.

## Scenario

Assumptions made:

- The owners – Tom and Tina – are less than 35 years old, which means that they can take the maximum loan tenure of 25 years.
- Tom and Tina do not have any prior debt or financial commitment.
- Tom and Tina have a fixed income
- Tom and Tina are taking a HDB loan which has an interest rate of 2.6%. However, calculations will be done using 3%, which is the interest rate floor for calculating HDB housing loan.
- Tom and Tina will max out the mortgage servicing ratio (MSR) which is capped at 30% of their gross monthly income
- HDB grants are not considered in the calculations
- The $1 million HDB in question is a resale flat

## The downpayment

As Tom and Tina opt for a HDB loan, a downpayment of 20% of the flat price is required.

downpayment = $200k

This means that they need to have a total of $200k either in their OA (ordinary account) in CPF or in cash to pay for the downpayment.

## The HDB loan

The mortgage servicing ratio (MSR) for buying HDB is 30%. This means that only 30% of Tom and Tina’s monthly gross income can be used to pay for their HDB monthly installments.

Based on the HDB home calculator, Tom and Tina should be earning a gross monthly income of $12,700 to get a loan of $800k. (note that this calculation is based on the interest rate floor of 3%). This will put their monthly installment at $3650.

gross monthly income = $12,700

monthly installment = $3650

## The savings timeline

Let’s calculate how long it would take Tom and Tina to save the downpayment, assuming that they have been earning $12,700 constantly (both have the same income), and save 30% of their take-home income.

total contributon to OA = $2900

total monthly cash savings = $3050

This means that if Tom and Tina used up all their savings, both from OA and cash savings, they could save $200k in 2 years and 10 months.

time taken to save $200k = 2 years 10 months

## Summary

It seems that with **3 years of diligence and a salary of $12,700**, a young couple like Tom and Tina can save enough to afford the **20% downpayment** and comfortably afford the **monthly installments of $3650**.

However, this also means that while saving up for this dream $1 million HDB, Tom and Tina most likely will not have any savings or OA to fall back on for the first 3 years, as they will be used up to finance the downpayment of the HDB.

In addition, Tom and Tina will most likely be maxing out their OA (and topping up with some cash) for the entirety of the 25-year loan if their salary does not increase over time.

Financial prudence should always be exercised to ensure that retirement, savings, emergency funds, and more should not be jeopardized due to a financially unwise property decision.

*Last Updated: 06 Nov 2023*