Owning a home is one of the most important items on Singaporeans’ checklist of life goals. And based on how horribly expensive it is to rent here, it’s easy to see why.
Renting a home or even just a room, even if it’s the only way for a 40-year-old virgin to get out from under his parent’s thumb, is usually frowned upon as a waste of money that could otherwise go towards saving for a downpayment.
But is renting really such a terrible idea? Here are some reasons why it might not be.
Buying is not necessarily a better investment if you make the wrong choices
Homes tend to get viewed as assets and the ticket to a comfortable retirement. But it turns out that not all homes are equal. Make the wrong decisions and your home purchase could end up being a lousy investment that could make you, gasp, lose money.
Take the current property downturn, for instance. Private property prices have on a never-ending downward slide since 2012. Buyers of certain types of properties such as shoebox units or those who haven’t benefitted from new MRT stations have had it even worse.
We can’t be certain when the property market will recover, but those who purchased private property just before the cooling measures were announced would have been the hardest hit.
HDB property isn’t necessarily a better investment, either, for those who buy old resale flats with less than 60 years left on their leases. Those who outlive their resale flats and whose homes do not get selected for the SERS en bloc programme will get their flats taken back by the government, potentially at no cost. All the cash they’ve forked out for their flat would be no different from rent paid to a landlord.
Buyers determined to make the most out of their investment should go for BTO HDB property, max out the grants they’re eligible for, and rent out their spare rooms.
Renting frees up cash that would otherwise be used for a downpayment
The downpayment that must be forked out in order to purchase a property is one of the most onerous financial burdens in Singapore.
To buy a $300,000 flat, a couple would typically have to fork out a downpayment of $30,000 to $60,000. For private property, the downpayment can be easily well over $100,000.
Renters do not need to fork out the downpayment, and the money can be channeled into other types of investments instead.
Less financial commitment
While the need to pay rent is a financial burden that’s every bit as pressing as making mortgage repayments, the level of commitment is much higher for property purchasers.
Forget about going on sabbatical to travel for a year or leaving a stable job to start a business when you’ve got a mortgage to repay. Renters have the option of downgrading or moving in with family should they face financial difficulties, and it is also easier for them to leave Singapore temporarily or permanently.
Renting gives you the flexibility to move to a more convenient location
One of the biggest problems of living in property owned by you or your family is that you’re basically stuck there for life, or until you can afford to purchase another unit.
Singapore might be a small country, but commutes can be long and unpleasant when you’re not favourably located.
Someone who’s purchased a flat in Punggol is basically stuck with a four-hour two-way commute should he get a job in Tuas. He would not have the option of simply moving to a flat in Pioneer, where by the way rents are relatively cheap due to distance from the city centre.
You can scale up or down according to your needs
Most Singaporean couples who ballot for HDB flats try to take into account their need to accommodate future children—even if they’re not sure if they want any.
If you buy a 3-room flat and later have more than one kid, fur is going to fly when they’re forced to share a room. However, aiming for a 4- or 5-room flat as broke newlyweds still reeling from the cost of their wedding is no joke.
Living in rental property allows you to scale up or down according to your needs in order to save on costs. For instance, a frugal young couple can share a 1 or 2BR unit or a master bedroom in a share flat, upgrading later on when they’re older or have kids.