You will be able to list and estimate what owning a home costs each year on top of the instalment.
Owning a home in Singapore costs more than the loan instalment. There is a second budget of property tax, building fees, insurance and repairs. Each item is small next to the instalment, but each one comes back every year.
Hakim and Farah co-own a flat in Bedok (an invented example). In their first December there, a letter from IRAS arrived with the property tax bill for the coming year. In January the bedroom air-conditioner started leaking. In March the town council raised the service and conservancy charges by a few dollars a month. Hakim had thought of the instalment as the whole cost of the flat. He realised there was a second ownership budget he had never written down.
Every property owner in Singapore pays property tax to IRAS each year. It is charged on the property's annual value, which is IRAS's estimate of the rent the property could fetch in a year if let out, excluding furniture and maintenance. IRAS reviews annual values. When market rents rise, annual values tend to rise, and so does the tax.
The rate depends on how the home is used. Homes the owner lives in are taxed at owner-occupier rates, which are lower and progressive, with a very low rate on the lowest band. Homes that are let out, or not lived in by the owner, pay the higher non-owner-occupier rates. Renting out the whole home therefore raises your property tax. Lesson 7.3, "Renting out a room or the whole home", returns to this.
Rates and annual values both change over time, and in some years the government gives property tax rebates. IRAS publishes the current owner-occupier and non-owner-occupier rates on its website. You can also look up the annual value of your own property, or a similar one, there. Farah and Hakim pay about S$800 a year (an example figure). For your own sums, use the figure for your own home.
HDB flat owners pay monthly service and conservancy charges to their town council. These cover cleaning, lifts, lighting and maintenance of common areas, and the sinking fund that pays for major repairs to the building. The amount depends on flat type and town council and is revised from time to time. Farah and Hakim pay about S$90 a month, or S$1,080 a year.
Condo owners pay monthly maintenance fees to the management corporation instead, plus a sinking fund contribution. These fees are usually much higher than HDB charges because they cover facilities such as pools, gyms and security. They go up whenever the management corporation decides to raise them, and a large repair can bring a special levy on every owner. If you are comparing a condo with an HDB flat, put the fees side by side, because over ten years they add up to a lot.
The insurance policies needed at purchase continue every year. Lesson 6.4, "Lawyers, insurance and the paperwork at completion", covered them. Fire insurance on the structure is a yearly cost. So are Home Protection Scheme premiums if you pay HDB flat instalments with CPF. Home contents insurance, which covers renovation and belongings, is optional. Farah and Hakim's required cover is about S$400 a year together.
Owners most often treat repairs as a surprise, but repairs are predictable. Air-conditioners need servicing and eventually replacement. Water heaters, taps, locks, ceiling fans, toilets and appliances all fail at some point, and the town council pays for no repairs inside your flat. Older flats need more work on pipes, wiring, windows and waterproofing.
The recommended practice is to set a yearly repair fund and pay into it monthly instead of waiting for something to break. There is no official figure for its size. Some owners use a fixed amount and others use a small share of the home's value. Older homes need a bigger fund than new ones. Farah and Hakim's flat is more than thirty years old and the bathroom is original, so they chose S$1,500 a year and put S$125 a month into a separate account. The fund does not make repairs cheaper. It makes them routine: when something breaks, you pay from the fund and nothing else in the budget changes.
For Farah and Hakim, S$800 + S$1,080 + S$400 + S$1,500 comes to about S$3,780 a year, or S$315 a month, beyond the instalment. These costs are small compared with the instalment, but they are real and all of them recur. To work out your own:
Look up your property's annual value, or a similar property's, on the IRAS website. Work out the tax at the rate for how you use the home, owner-occupier or not. Take your monthly service and conservancy charges, or your condo maintenance fees plus sinking fund contribution, and multiply by 12. Add your yearly insurance: fire insurance, Home Protection Scheme premiums if you pay HDB instalments with CPF, and home contents insurance if you chose it. Set a yearly repair fund, either a fixed amount or a small share of the home's value, with more for an older home. Divide it by 12 for the monthly transfer into a separate account. Add the items for a yearly total and divide by 12 for a monthly figure.
Lesson 7.4, "Build your annual cost of ownership", adds loan interest and other costs to these. That gives you a full yearly figure to compare with rent.
In the activity below, look up your property tax, or that of a similar home, on the IRAS website, and list your other yearly ownership costs.
Look up the property tax for your home, or a similar one, on IRAS. Then list the other costs you pay each year to own it.
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