Time To Review $8,000 HDB Income Ceiling?

Source : The Straits Times, 14 Aug 2007

The Housing Board wisely advises that ‘Buying a new home is a long-term financial commitment that could stretch up to 20 years or more. If you don’t want to overstrain your financial resources, it is prudent to do your sums first before you commit to any flat purchase’.

A new five-room flat in Toa Payoh is now valued at $456,000 by HDB. Based on HDB’s monthly instalment calculation, after paying a 10 per cent deposit a couple (both aged 30) would need to fork out $1,642 every month for the next 30 years.

For a total household monthly income of $8,000 (the income cap to be eligible for an HDB loan), the monthly CPF contribution by the couple, assuming each earns $4,000, would be $920 x 2 = $1,840, leaving a net CPF savings per person of $99 a month.
For the next 30 years, contributions to each person’s Ordinary Account would add up to $35,640, and, by then, the couple would be 60 years old.

If the retirement age remains at 62, the couple would each have only $57,720 ($920 x 12 months x two years + $35,640) in his/her account, which is short of the CPF Minimum Sum of $120,000. (Income, CPF contribution, inflation, medical cost, etc, are assumed constant so as not to complicate the calculations.)

Is it time to review the income ceiling of $8,000 for HDB flats?

Lai Ga Wai (Ms)