Housing And Equity In Singapore

The monthly average income of an individual in Singapore is about $4

,000 in 2010. In 2008, the average income was about $3,977 per person. In 2009, the average income per person was about $3,872. Assuming that both spouses are working in a certain household, the average income would be an estimated $8,000 per household. Considering the following household characteristics:

average couple household income of $8000 (with no current liabilities)

30 years housing loan tenor

50% debt servicing ratio

2% interest rates

The expected maximum property price that a household or a couple could afford is about $1.082m. This would mean that the average household in Singapore could afford a property worth $1.35m. However, like most loan accounts or borrowings, there is the problem on raising a part of the equity that would serve as down payment. The best strategy is to find the lowest interest rate among the aggressive Singapore banks offering this kind of services.

The interest rate setting among conservative banks in Singapore is normally at the level of 3.75%. This reduces the loan borrowings to about $863,000 loan size. The computation of the income and the interest rates data for loan borrowings would certainly reflect that the average household in Singapore could only afford a property worth $1.08m.

Rich businessmen and ministers contributed to the increase of the average salaries. This trend results to a wide gap between the highest and lowest salaries, which made the mean salaries of the population a bit lower. In 2009, the average household income was $4,850 as reported by the Singstat (Singstat, http://www.singstat.gov.sg/news/news/op19022010.pdf ). If the median incomes were sorted by type of property, the result would be a household income of $12,500 for private flats, condominiums, and private houses (Singstat, http://www.singstat.gov.sg/news/news/op19022010.pdf)

The computation for the average household income in Singapore is as follows:

Average income per person as of 2010 = $4,000

No. of persons in a household = 2 (couple)

Average household pay = 2 x average income per person

Average household pay = 2 x $4,000

Average household pay = $8,000 as of June 15, 2010

The result gives us an idea on the existence of considerable income disparity within Singapore. Most private condominium owners have a household income of approximately $12,500. If we lower the prices for private condominium to the average household income of the Singapore population, which is $8,000, this would produce a different real estate scenario.

by: Shirley Tan

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