Rent Or Buy – Which Way To Go?

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Home ownership in fact is a big deal in Singapore and in Asia overall. But buying is not as easy as renting.

There seems to be an intrinsic desire in mind of most Singaporeans to, in due course, find a ‘nest’ and make a home. This, more often than not, means that buying a home is more desirable than renting. Buying a property means owning it. And owning brings a sense of fulfillment and security.

Home ownership in fact is a big deal in Singapore and in Asia overall. But buying is not as easy as renting. And it requires more commitment and determination to own a home than to rent one. Sadly, the speedy raise of values of home prices over the last couples of years in Singapore has pushed home ownership idea to backseat for many home buyers, especially for the first timers. Home ownership is a long-term goal; it requires certain planning, tight budgeting and saving strategies. Renting on the other hand is easy.  It is, as opposed to buying, provides people with more freedom to relocate. The moment the rental contract expires, anyone can move to a new place.

Buying requires a down-payment. Getting this down-payment ready can take several years of saving. If someone opts for a HDB flat, unless he / she is eligible for a HDB concessionary lend, the person will have to pay 5% or 10% of the purchase price in cash. The maximum loan repayment period is 65 years minus the buyer’s age or 25 years, whichever is shorter. However, not everybody is qualified for a HDB concessionary loan. In that case, taking a loan from a private financing institution is the next alternative. But for private properties, mortgage financing is the only option. Here again one has to arrange down-payment which is 5% or 10% of the purchase price.

Buying, in contrast to renting, means that the owner has to bare the maintenance fees, repair cost, agent fees, insurance fees and council fees. Renting becomes a safe option when someone wants to have a place to live in but does not have down-payment amount yet to buy a house. Renting also is a good option when someone is not sure whether he / she would eventually settle down. Renting, in addition, gives the option of shifting to a newer place in future. Rent of a studio of 600sq ft in central neighborhoods with easy access to the Central Business District, is typically S$3,800 -S$4,000 a month, while a mid-range apartment of three to four bedrooms costs S$5,000-S$8,000. A top-end six-bedroom penthouse with over 2,500sq ft off Orchard Road costs S$25,000 a month and a semi-detached house costs from S$25,000 to S$40,000. On the other hand, for a two bedroom HDB flat, which costs around $112,000, one has to pay S$164 as monthly installment for mortgage loan. For a three bedroom HDB flat, that costs around $194,000, monthly installment comes to $579. To the potential buyers’ advantage, private residential property price index of Singapore fell 0.9% in the October-December quarter of 2013. The decline in suburban housing values was 1%.

As rent is, historically, quite high in Singapore and property values are on decline at the moment, it is better to buy a home, provided the down payment amount is ready. Buying a home can be seen as an investment. Value of property in Singapore always are appreciating or maintaining a certain value, so the equity (ownership) is always on the rising side. To add with it, there is no Capital Gains Tax in Singapore. The lack of Capital Gains Tax in reality is a massive incentive to buy a home here. Also monthly loan payments and property taxes in Singapore are tax deductible.


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