Number of households that can afford a S$1M- condo jumped by a whopping 86%
No wonder as monthly mortgage payments fell 18% from 2008 to 1Q12.
Here's an analysis from OCBC Investment Research:
Income hurdle for S$1m condo down 18%.
From 2008, we saw interest rates decline from ~2.5% to their current levels around 0.4%.
Using a S$1.0m condominium as a benchmark, the monthly mortgage payment fell from about 18% over this period from S$3.4k to S$2.6k.
Assuming mortgage payments constitute at most 30% of household (HH) income, the income hurdle for a S$1.0m property fell 18% from S$10.6k to S$8.7k per month.
No. of households above income hurdle highly sensitive at these levels.
While this dip appears to be little at first glance, the number of households above the income hurdle is highly sensitive around these levels.
To illustrate, our analysis show that the number of households that can afford a S$1.0m condominium increased from 240k households to 450k households – a whooping 86% jump1 - as monthly mortgage payments fell 18% from 2008 to 1Q12.