On the same day when it was reported that “HDB resale deals at 16-year low“, National Development Minister Khaw Boon Wan hinted that there may be changes to executive condominium (EC) scheme. He said,

“Because their upside in the current property market is so big, the subsidy they earn getting an EC compared to the subsidy that a lower-income family, through a three-room, four-room or five-room BTO… there’s a substantial gap”

And here comes today’s headline news, “Buyers in tizzy over possible EC tweaks”. It quotes:

“It’s not right to just look at the profit we make,” said engineer Eddy Lau, 40, whose $900,000 EC unit will be ready in 2015. “We also pay more in interest over the years for the EC. For us who are sandwiched, ECs are the only option to upgrade.”

The EC scheme was launched in 1996, targeted at the “sandwiched” class of home hunters who were priced out of private property. First-time EC buyers currently receive a grant of between $10,000 and $30,000.

I told you in my previous article “When will the HDB market ‘Show Hand’?” to think out of the box. Here is the strange thing. Currently, ECs have an income ceiling of $12,000. If you can buy an EC, it means your “Your average gross monthly household income” is less or equal to $12,000. And here you are buying a $900,000 house?

Use this online interactive HDB loan calculator provided by CPF, assuming about 20% down payment is made. Every month, 35% of your household income ($4,200) has to be spent on loan repayment, and you have to pay for another 20 years till you are age 60!

You are right. You have to “pay more in interest over the years”, that is whopping $250,000 based on this calculation.

You are right. You know you are “sandwiched”.

So why do you have to “upgrade” and buy such an expensive house?

Granted, you can choose whatever lifestyle you want to enjoy, but that should not be at the cost of other taxpayers.

About the Author

Ivan Guan is the author of the popular book "FIRE Your Retirement". He is an independent financial adviser with more than a decade of knowledge and experience in providing financial advisory services to both individuals and businesses. He specializes in investment planning and portfolio management for early retirement. His blog provides practical financial tips, strategies and resources to help people achieve financial freedom. Follow his Telegram Channel to join the FIRE community.
The views and opinions expressed in this article are those of the author. This does not reflect the official position of any agency, organization, employer or company. Refer to full disclaimers here.

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