You will be able to list and estimate the yearly costs of owning a home beyond the instalment.
In their first December in the Bedok flat, a letter from IRAS arrived with a property tax bill for the coming year. In January the air-conditioner in the bedroom started leaking. In March the town council's service and conservancy charges went up by a few dollars a month. None of it was large on its own. But Hakim, who had thought of the instalment as "the cost of the flat", realised there was a second budget for owning a home that he had never written down.
This lesson writes it down.
Every owner of property in Singapore pays property tax to IRAS each year. It is charged on the annual value of the property: IRAS's estimate of the rent the property could fetch in a year if it were let out, excluding furniture and maintenance. IRAS reviews annual values, and when rents in the market rise, annual values tend to follow, and so does your tax.
The rate depends on how the home is used. Homes that the owner lives in are taxed at lower, progressive owner-occupier rates, with the lowest band at a very low rate. Homes that are let out, or not occupied by the owner, are taxed at higher non-owner-occupier rates. If you rent out the whole home, your property tax rises, a point lesson 7.3, Renting out a room or the whole home, comes back to.
Both the rates and annual values change. IRAS publishes the current owner-occupier and non-owner-occupier rates, and you can look up the annual value of your own property, or a similar one, on the IRAS website. In some years the government also gives rebates. Use the figure for your own home. In Farah and Hakim's example, their property tax came to about S$800 a year, a figure made up for this lesson.
HDB flat owners pay monthly service and conservancy charges to their town council. These pay for cleaning, lifts, lighting and maintenance of common areas, and for the sinking fund that pays for major repairs. The amount depends on the flat type and the town council, and it is revised from time to time. In the example, Farah and Hakim paid about S$90 a month, or S$1,080 a year.
Condo owners pay monthly maintenance fees to the management corporation instead, plus a contribution to the sinking fund. These are usually much higher than HDB charges, because they cover facilities such as pools, gyms and security. They are also raised when the management corporation decides to, 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.
Lesson 6.4, Lawyers, insurance and the paperwork at completion, covered the policies you need at purchase. They carry on each year: fire insurance on the structure, and Home Protection Scheme premiums if you pay HDB flat instalments with CPF. Add home contents insurance if you choose to cover your renovation and belongings. In the example, the required cover cost them about S$400 a year together.
Repairs are the cost owners most often treat as a surprise. They aren't. Air-conditioners need servicing and eventually replacing. Water heaters, taps, locks, ceiling fans, toilets and appliances all fail at some point. Inside your flat, the town council doesn't pay for any of them. Older flats need more: pipes, wiring, windows and waterproofing.
Instead of waiting for a leak, set a yearly repair fund and put money into it monthly. There is no official figure for how much. Some owners use a fixed amount, others a small share of the home's value, and older homes need more than new ones. Farah and Hakim chose S$1,500 a year, S$125 a month into a separate account, because their flat was more than thirty years old and the bathroom was original.
A repair fund doesn't make repairs cheaper. It makes them boring, which is the point. When the air-conditioner fails, you pay from the fund and nothing else in your budget moves.
Put together, Farah and Hakim's example costs beyond the instalment were about S$800 of property tax, S$1,080 of service and conservancy charges, S$400 of insurance and S$1,500 for repairs, about S$3,780 a year, or S$315 a month. Small next to the instalment, but real, and every one of them recurs.
Lesson 7.4, Build your annual cost of ownership, adds loan interest and the other costs to make a full yearly figure you can compare with rent. For now, collect the parts. 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 your property tax or that of a similar home on IRAS and list your other yearly ownership costs.
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