Let’s get proper on the property, shall we? Owning a house with the intention to occupy in the long run is inarguably a fail-safe, conventional wisdom for the average Singaporean folk, because it multiplies that magic ‘E’ word: Equity. But sometimes we get clouded by what the majority is doing and forget that rentals can be a sweet escape from diving headfirst into a heavy financial commitment.
Fortunately, we know just the guy to help you make a list of pros and cons. We speak to Marvin Lee, Associate Division Director at ERA Realty Network, to get his professional take on whether it’s better for you to purchase or rent a house.
The not-so-curious case of HDB
Before we delve deep into the merits of renting and buying an apartment in Singapore, let’s get one thing out of the way. If you ask The Bear, it’s a no-brainer that first-time home owners shouldn’t think twice about buying. Specifically, buying a HDB flat.
We can think of only good things: on top of the already subsidised price, you are eligible for up to S$40,000 worth of grants with the Additional CPF Housing Grant (AHG), Special CPF Housing Grant (SHG) and Family Grant (S$20,000 or S$30,000 if you are buying resale). The HDB concessionary loan can also ease your big purchase, the initial financing stage that is, by hedging against interest rate fluctuations and allowing up to 90% loan on your home. When it’s all said and done, the substantial savings you get compared to buying a condo could very well give you the opportunity to do just that after the HDB minimum occupancy period (MOP): invest in a second property.
But most of all, you and your partner get to tell the world on Facebook how you guys now have a place to call your own. Can you imagine how much it’s going to kill the romance if you had proposed with “hey, let’s rent a flat!”?
Advantages of buying a property in general
In what is perhaps the biggest lesson in Robert Kiyosaki’s Rich Dad, Poor Dad, it is possible for people break away from the slog-for-a-fixed-salary-to-pay-the-bills cycle by acquiring income generating assets, so it can automatically settle your expenditures. When you buy an apartment, whether it is a HDB flat or a two-bedder at a condo, you are essentially owning an appreciating asset. The value of your equity shoots up. If you decide to sell sometime down the road, you could very well pocket a big fat cheque from the sale.
When you rent, you can’t quite fill up your personal balance sheet’s asset column the same way. What you are doing is throwing money into a black hole, like paying for a car loan. The only profit you get is, well, you get absolutely nothing actually.
According to the sentiments of Marvin Lee, it is better to just buy now instead of timing the property market. “I really believe in the philosophy ‘Don’t wait to buy property, but buy property and wait’. I see the benefits of this because waiting reduces your loan tenure and restricts your ability to buy due to government policies and measures, as well as global factors. The best time to buy is when it is deemed safe and you can afford it.”
Besides a possible sale in the future, there is also another way to generate profits from your home. Lee adds on: “You can generate some cash flow by leasing out your current place and then renting somewhere that is cheaper. Everyone could do with a little more money.”
Advantages of renting
We have made the case for buying, yet renting an apartment doesn’t really get the credit it deserves. If anything, the decline of rental prices could be a signal for aspiring home owners to test the waters right now. According to data pulled from SRX, rental prices have fallen by about 15% for the past 10 quarters. Mr Lee also noted that rental apartments come fully furnished nowadays, saving you the hassle of hiring interior designers and embarking on a IKEA shopping trip.
“Renting allows you to try out a location for your potential new home. You need a place to stay, but once you have bought your place, it comes with the financial commitments and it is not liquid due to the seller stamp duty – you have to stay for five years before you think of selling,” Mr Lee said.
“However, a rental home is different. You can try it out for a minimum stay of six months. I've done deals where the tenant offered to buy the unit from the landlord after renting for two years.”
So… what’s the move? Buy or rent?
In return, the question we are going to pose is, who are you and what is your lifestyle like? We said it before, and we’ll say it again. It would be wise for newly engaged couples to apply for a new HDB and own it. Lee also confirmed it with his opinion: “It is better to buy a new launch project due to the fact that in most of the property sales, the first owner tends to make the most money unless the property is bought at the peak of the current property cycle.”
If you are a singleton hunting down your own space, HDB is out of the question unless you are 35 and above. Your only option is to turn to private residential properties, but the cost might be too much to bear even for a studio. Renting an apartment would strike the middle ground perfectly here, although there is a chance you have to put up with ugly interior design that doesn’t scream bachelor pad as much as, err, just a pad. If the owner decides to sell, out you go, too.
Then again, isn’t that the beauty of rentals? It’s like a no-strings-attached summer fling. You can simply put yourself back on the market and move on to another.
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