Will million dollar HDBs be the norm moving forward? - Mortgage Master Blog

Will million dollar HDBs be the norm moving forward?


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by Benedict Ang on


With more and more million-dollar HDBs popping up in the news, many might wonder how the average Singaporean can actually afford them. Beyond that, the often talked about question is: Will HDB prices continue to rise? When will be a good time to enter the market?

In order to understand HDB trends, it's important to go straight to the beginning to understand how the Housing Development Board (HDB) came about. Created in 1960, HDB was birthed with a mission to fix the nation's housing crunch. Their mandate has always been to provide affordable, quality homes for Singaporeans.

Looking at today's data where 80% of Singaporeans live in HDBs, it is safe to say that HDB has done their job of providing homes for Singaporeans well. However, news of million dollar flats do not exactly convey "affordable" vibes, leading many to question if HDB is still fulfiling it's goal in providing "affordable" homes.

Can the Average Household Afford It?

Interestingly, our research has shown that the million dollar HDB price tag is close reach for the average Singaporean family. With the median Singaporean household income at $10,869, a typical family could get a bank loan of about $617,748 for a HDB.

Note: A bank loan is the maximum amount the bank can loan you. It does not include the property downpayment and usually takes up 75% of the total property price.

Source: 99.co Affordability Calculator

With the addition of your minimum 25% down payment, the average family can stretch to buy a property worth up to $823,664.

Honestly, that's pretty decent, and is above the median transacted price for most resale properties in Q4'23.

Source: HDB

How Far Will Prices Rise?

80% of our population lives in HDBs. For simplicity, we will assume that the top 20% are living in private homes.

Households at the top of the 80% are easily pulling in over $17,500 in income. This would allow them to get their hands on loans up to $994,626.

Source: 99.co Affordability Calculator

Similarly, with the addition of 25% downpayment, these households can stretch to buy homes of up to $1,326,168, a staggering 32% higher than the million dollar benchmark.

This suggests further room for growth for HDB prices as household income increases.

Keep in mind, this is based on a floor rate of 4% interest rate. Drop that to 3%, and loan affordability jumps by almost 11%. With news of Feds lowering their interest rates in the coming months, coupled by the fact that we have not reached the peak in household-income-to-affordability prices, it is likely that HDB prices will continue increasing in the future.

HDB Prices During A Recession

If you have always been someone to look at the glass half full, you might be praying for a recession, thinking it might drop HDB prices. Sad to say, while prices dipped during the '97 Financial Crisis, the HDB price index held steady in the '08 Subprime Crisis.

Source: Mortgage Master SG, Singstat

This suggests that HDBs will most likely keep their value even when the economy dips. Since 1997, the Singapore government has introduced multiple measures to make sure Singaporeans do not overstretch on their mortgage, and can maintain it during tough times. This is one of the reasons why default for mortgage remained low even in the recent Covid period.

Entering The Property Market

If you're someone looking to buy a HDB, the age-old saying of "It's not about when you enter the market, but how long you're in the market" is still very much true.

Instead of sitting back and waiting for prices to drop, why not speak to our experts who can advise on the best next step on your homeowner's journey.

As a cherry on top, if you're looking to sell and enter the HDB market, or upgrade to a bigger flat, our partner Property Master is offering a 50% discount on their commission for homesellers. Enquire with them today and don't wait till it's too late.

Posted in Interest Rates, New Purchase on May 08, 2024