Top image: Zachary Tang / RICE File Photo
It’s a process every Singaporean knows by heart: meet someone, date for a few years, apply for a flat, save up, get married, move in, settle down, and gradually pay off the mortgage.
Getting your foot on the ‘adulting escalator’, as I like to call it, depends to some extent on luck. But once the first step falls into place and the ball starts rolling, everything comes down to a combination of precise timing and careful planning.
Jokes about will-you-BTO-with-me marriage proposals aside, the linkage of home ownership to marriage means that several major rites of passage are essentially rolled into one: marriage, moving out of your parents’ place, and buying your first home. For many young Singaporeans, all these life changes will take place within a couple of years or less.
As it is, that’s a lot to handle. Now, add a pandemic into the mix.
Covid-19 has landed everyone in a cruel double-bind. Many of the most treasured parts of normal life are now on hold indefinitely, but our less enjoyable obligations remain. The economy might be in a medically-induced coma, but bills still need to be paid—chiefly, rent and mortgage payments—even as fears about job losses and business closures abound.
Around the world, housing security has emerged as one of Covid-19’s numerous attendant crises, with grim reports of tenants unable to pay rent and homeowners anxious about foreclosures. But in Singapore, at least, homeowners seem to have avoided the worst for now.
Despite the grim economic outlook, none of the young homeowners I spoke to were worried about losing their homes, largely because of how Singapore’s home financing policies have been structured.
In Singapore, home financing is famously linked to the CPF system. For most of us, a significant portion of the down payment can be covered by CPF funds, aided by housing grants. Similarly, most of our mortgage payments can be made with CPF funds, cash, or a mixture of both.
Even in ordinary times, most Singaporeans elect to pay the bulk of their mortgage instalments with their CPF funds, if only because it helps with cash flow. This system also means that Covid-19 has relatively little effect on most homeowners’ ability to keep up their mortgage payments—a rare area of reprieve amidst widespread volatility.
Jeremy*, 28, who works in financial services, moved into his BTO flat with his wife last year. They financed the purchase with a loan from HDB, which they are now paying off using their CPF funds.
As both of them are in full-time employment and have kept their jobs, they haven’t faced any problems with their mortgage payments.
“We’ve been lucky,” he said. “We’ve kept our jobs, so it’s manageable for now.”
Although the couple also took out a renovation loan with a bank, they haven’t had issues servicing this as their finances are currently stable. (The government has worked with HDB and various banks to introduce measures to assist homeowners, such allowing deferments of instalments for several months).
Kevin*, 28, who successfully applied for an executive condominium unit with his fiancée in early 2018, was also cautious but calm.
As their flat is still under construction, the only money they’ve put down so far was for the option-to-purchase and half the down payment. The balance of this is due when they collect their keys (currently scheduled for June), at which time they will also begin servicing the mortgage.
Kevin explained that as he had only begun working a few months ago, the down payment used up most of the funds in his CPF Ordinary Account. He intends to let his CPF funds accumulate, and pay the mortgage instalments with a mix of CPF and cash.
“If nothing changes [on the job front], I think we’ll be okay,” he admitted.
“We’re both in full-time jobs, and with CPF acting as a cushion, it’s not too bad, although our financial longevity is a bit more complicated because we’d have to make sure we have enough left in the long run,” he said. “But for now, we’re okay. I think it would be very different if we were freelancers or didn’t have fixed salaries.”
This is exactly the situation which Andrea*, a freelance marketer and digital content creator, has found herself in. Like many other freelancers, the Covid-19 situation has mutated the flexibility of her lifestyle into precarity.
“We applied for our BTO, and I guess we’re kind of lucky because the flat will only be ready in two years’ time and deductions haven’t started yet,” she said. “I’m more worried about whether our loan calculations will affect this.”
The terms of their loan were calculated based on her and her husband’s incomes at the time they applied for their flat. At the time, her earnings had been fairly steady, but since the outbreak started, work has dried up and her income has plummeted. (As a freelancer, she does not receive employer CPF contributions, although she is required to contribute to her MediSave account.)
Although she was planning to move into a more permanent job, the position was not confirmed before the circuit breaker kicked in, and she’s unclear about when (or if) she will be able to begin the role.
“I’m currently jobless,” she said, anxiety creeping into her voice.
“I think it’s a bit early to tell now, but I’m not sure how this might affect our loan payments. They might need to recalculate it since our income has changed, and given the downturn, I don’t know what my job prospects will be like.”
Although she had been steadily saving up for the last few years, and her husband’s job has not been affected, paying for their wedding ate up a chunk of their finances (the couple got married in February this year).
For the time being, Andrea is living with her husband’s family, passing the time by taking courses and looking for work. The assistance for self-employed Singaporeans announced in the Resilience and Solidarity Budgets have also provided some relief. (Eligible self-employed persons (SEPs) will receive three quarterly cash payouts of $3,000 each in May, July and October 2020 under the SEP Income Relief Scheme, while the SEP Training Support Scheme provides support for SEPs to train and develop their skills.)
“It’s been really stressful to acknowledge, but after speaking to my friends, I realised that lots of people are in a similar situation,” she said.
“I’m just trying to stay positive and do my best to look out for opportunities. Things could be a lot worse.”
More so than any other time in recent history, Covid-19 has turned the spotlight on the art of decision-making. We’ve seen this playing out on multiple levels, sometimes dramatically: doctors having to decide which patients to save and which to sacrifice; governments torn between extending lockdowns and prolonging misery, or lifting them too early and risking another wave of infections.
At the personal level, the variables differ, but the challenge is essentially the same. How do you weigh up benefits and trade-offs, as well as the short- and long-term implications, so as to make the best possible choice?
In the case of housing finance, what the ‘right’ choice looks like will differ with every couple. Servicing a housing down payment and/or loan repayments with CPF Ordinary Account funds might free up cash for other important expenses, like starting a family. On the other hand, choosing to pay the instalments with a mix of cash and CPF, rather than drawing on CPF entirely, might pinch in the here-and-now, but would leave a buffer of accumulated CPF funds to help cover mortgage repayments in the face of wage disruption.
There is no perfect solution, but in one sense, this isn’t unique to Covid-19. The structure of the ‘adulting escalator’ means that difficult choices will always have to be made, sometimes with less-than-perfect information.
In the meantime, with the outbreak still ongoing, Kevin is taking things in his stride.
When we spoke, his plans had hit a bit of a snag. He and his fiancee were due to move into their flat in July, but with the circuit breaker having halted construction, he wasn’t sure if their home would be ready to move into. Their wedding ceremony, originally planned for June, might still go ahead, but they are mentally preparing for this to be disrupted as well.
Despite the upheaval, he manages to laugh when I ask him how he’s been coping—not the bitter snort of someone who feels hard done by, but the wry chuckle of someone hoping for the best while preparing for the worst.
“I don’t know yet if we’ll be able to move in as planned, so I guess we’ll have to wait and see,” he said. “We’re just trying to take it a day at a time.”
This post was sponsored by CPF.
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