Many Singaporeans used to be put off by the thought of sparing $1,500 per month (and above!) to rent a studio apartment or flat.
Plus, there’s that issue about not being able to renovate your rental “home”. But is renting really that bad?
If you’re on the fence about renting, perhaps these five reasons might shed light on why the younger generation of Singaporeans are not that averse to renting these days:
- Buying out of budget can be worse
- Renting frees up lump sum cash savings
- Financial commitment and cashflow
- Flexibility to move locations
- Flexibility to downgrade or upgrade
1. Buying a home may not necessarily be a better investment
Buying a house that’s way out of budget, one that lands you in more debt and interest, or one that’s depreciating furiously may not be a good investment choice after all.
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 property purchase and decisions, and your home purchase could end up being a lousy investment that could make you lose money.
Take the 2017 property downturn, for instance. Private property prices went 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 had it even worse.
We can’t be certain when the property market will recover, but those who purchased private property just before the property cooling measures were announced would have been the hardest hit.
HDB flats aren’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 or 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 HDB BTO property, max out the grants they’re eligible for, and rent out their spare rooms.
Read Also: Renting HDB or Condo Checklist: 9 Things to Watch Out For
2. Renting frees up lump sum cash savings
The cash (or CPF, depending whether you take a HDB or bank loan) 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 down payment of $60,000 to $75,000 minimally. For private properties, the initial cash payment (includes down payment, BSD, ABSD etc.) can be easily well over $200,000.
Renters do not need to fork out the down payment, and the money can be channeled into other types of investments instead.
3. Financial commitment and cashflow
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 hefty and overstretched mortgage to repay.
However, 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.
4. Flexibility to move around several locations
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 favorably 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, whereby the way rents are relatively cheap due to distance from the city center.
Read More: Men Sub-Letting Leedon Heights to Airbnb Charged For Illegal Home-Sharing
5. Flexibility to upgrade or downgrade
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 financial and family needs in order to save on costs. For instance, a frugal young couple can share a one or two-room unit or a master bedroom in a share flat, upgrading later on when they’re older or have kids.
When finances are tight, you always have the flexibility to downgrade further into an even cheaper rental unit.
Read Also: Cove Rental lets you meet your flatmates online
This article was first published on Moneysmart.