There is a reason the overwhelming majority of Singaporeans continue to live with their parents until they’re married—the right to walk around naked at home isn’t worth dying of starvation for.
While married couples and over-35s can take advantage of government grants to buy HDB flats, the rental market is another story. The cost of renting the cheapest possible one bedroom condo unit in Singapore in an area as far flung as Bukit Panjang can cost around $1,500 a month, and when you get closer to the city fringe you can end up paying 50% to 100% more.
But rents have been falling steadily in Singapore, and over the past year many expats and renters have successfully hopped to different units in the same condos they’ve been renting at in order to knock a few hundred dollars off their rent.
This is good news for Singaporeans who wish to move out of their parents’ homes so their mums can stop checking their Whatsapp messages, but who don’t have enough money to buy their own place just yet. But is this financially prudent? Assuming you have no family home you can fall back on for free accommodation, here’s a comparison between the advantages of renting and buying.
PROS OF RENTING
Lighter financial commitment
Just because everyone else has balloted for an HDB flat doesn’t mean you necessarily should. Buying is a huge financial commitment that many end up paying for all their working lives. I’ve got friends whose 65 year old parents are still paying for that mortgage on their HDB flats.
Renting can involve less financial hardship in the short-term since you don’t need to cough up the cash for a downpayment, and you’re not chained to a mortgage for the rest of your life. Your deposit is likely to be only one or two months’ rent which sure beats paying a $50,000 downpayment.
Also, a recently launched product called Cardup now enables you to actually benefit from paying your rent, by allowing you to pay your rent with your credit card. This certainly changes the game when it comes to accruing things like air miles, which typically requires a significant spend in order for you to collect enough miles to redeem for a trip. You can read our review on the service here.
For Singaporeans with families they can fall back on, not being tied to a mortgage also means that if you fall upon hard times, you can still move back home. If that’s not an option, you still have the option of downgrading to a smaller place or shareflat.
Flexibility to move
Because most Singaporeans live in accommodation that either they or their families own, you often hear complaints from some guy who lives in Bukit Panjang but has to commute to Changi Business Park for work. If he were a renter, he would have the option of moving to Pasir Ris, where rent prices are relatively low and which would reduce his commute considerably.
As a renter, you have the flexibility of moving when your lease is up. If you get a new job on the other side of the island, decide you would rather live close to an MRT station or get into a feud with your neighbours, you can always leave.
You can also start by renting a small and relatively cheap place, and then upgrade when you are earning more or need more space. Purchasers, on the other hand, often feel compelled to buy as big of a property as they can afford “just in case” they need the space later.
Fewer maintenance obligations
As a tenant, you’re responsible for cleaning up that vomit your friend left on the living room floor. But depending on your rental contract, there are certain things you’re not responsible for, such as maintenance of the air condition unit, plumbing and so on.
PROS OF BUYING
Rents are lower now, but still freaking expensive
Rents are a shadow of what they were a few years back. You can now rent a common room in a shared HDB flat in, say, Yishun for as little as $500 these days. For a one bedroom or studio in a condo, you’re usually looking at at least $2,000 to $2,500 to live in a decent area like Jurong East, with HDB 1 bedroom units costing at least $1,500.
On the other hand, let’s say you take out a 20-year $300,000 loan to buy a 4-room HDB flat. You’re going be to be paying the bank about $1,400 each month, which would be what you’d pay renting an HDB 1 bedroom unit.
Can generate income
For certain people, buying a home can also help them to generate income. This applies mainly to those people who can afford to purchase a home with more bedrooms than their household needs, and who are willing to rent them out.
While this is indeed a possibility even for those who live in HDB property, as the HDB allows rental of individual rooms before the Minimum Occupation Period is up so long as you continue to live in the flat, many people are not comfortable with the presence of tenants in the same house, so it really depends on your level of openness.
Chance to use CPF funds
One big reason Singaporeans are ploughing so much of their money into real estate is the fact that such a large percentage of our incomes gets tied up in CPF. One of the few ways to access that money is to use it to buy property. You can also use CPF to make home loan repayments. All that’s left is just to find the best home loan available on the market.
Conversely, renters do not get to use a single cent of their CPF money to pay for their accommodation. They have to continue contributing a large chunk of their monthly earnings to CPF, while having to fork out rent using what’s left.
HDB purchasers can take advantage of government grants
For those who qualify for HDB grants, there is a strong argument for buying a flat whether they really need it or not, since the government is giving them free money.
According to the recent budget announcement, families can now get up to $50,000 (up from $30,000) worth of grants for four-room or smaller flats
Granted, the days when your flat would turn you into an overnight millionaire are pretty much over. Property prices continue to decline and it looks like the cooling measures aren’t going anywhere.
Still, if you hold your property for the long term, there’s still a chance it will eventually pay off as an investment. There is no capital gains tax in Singapore, which means every cent you make on the property market is yours to keep—well, whatever’s left after deducting legal fees, property tax you’ve paid over the years, interest on your home loan and renovation costs, that is.
Your loan installments and property taxes are tax deductible. By contrast, renters don’t get any tax breaks.
So you want to convert your home into a space ship? Be our guest. As a homeowner, you can do whatever the hell you want with regard to your décor. So go ahead and plaster the walls with Girls’ Generation wallpaper.
Can be inherited
There is no inheritance tax in Singapore. This means that if you die and pass your flat or apartment on to your kids/spouse/secret lover, they don’t get taxed for it. If you’ve got family members you want to provide for after your death, you might want to buy a home so they can continue to live in it when you’re gone. Of course, bear in mind that most HDB flats and many condos are on a 99 year lease, which means they’re not going to be passed down to your grandchildren or greatgrandchildren.