In Singapore, we’re taught that buying a home is a natural, ideal thing to do. Its almost like a rite of passage and a sign of adulting.
However, buying a home is actually a major decision and a deeply personal one. Rather than “going with the flow” and accepting this norm, there are actually good reasons why renting a property is more advantageous than buying! The following are four of them.
For the purposes of this article, let’s ignore the fact that unless you are purchasing a freehold property, you don’t actually “buy” a home in Singapore. In the case of “buying” a new Housing Development Board (HDB) flat, you are actually just leasing your home for 99 years.
1. Flexibility with Fewer Obligations
Just got a new job offer in another country? Great for you! Unless, of course, you just signed yourself up for a new HDB lease and are “stuck” with a mortgage you need to continue to service – even if you are not living in it.
Another flexibility renting affords you is the ability to move from place to place. Rather than being “stuck” in one location, when you change jobs, you can move nearer to your workplace. Young families can move as their child grows up and be located near the educational institutions of their preference.
Of course, even if you buy a home, you can always sell and move. But doing so is much more challenging. Selling a home takes a lot of time and effort, and if the market isn’t favourable to sellers and you really want to sell, you might stand to lose a lot of money.
Renting also allows you to try out different neighbourhoods, before you settle down on your favourite one to lay down your roots. In the meantime, you don’t have to pay for maintenance costs, property taxes or even repair work for the house.
Furthermore, if you use your credit card to pay for your monthly rental to your landlord (yes you can – even if they do not accept credit cards!) through CardUp, you can even get to enjoy cashback, miles or points on your cards. This helps you save even more each month, while getting ‘rewarded’ on your spend.
2. No Opportunity Cost of a Hefty Downpayment
When you rent a home, you typically just need to cough up one month’s rent as a deposit. Because of the ability to use our Central Provident Fund (CPF), we tend to forget that buying a house requires a substantial downpayment. However, there is an opportunity cost of this downpayment. For instance, we would not be able to use it for investments, or even “earn” interest from CPF.
While some argue that this is a natural, “safe” thing to do, not everyone can afford to tie up their cash in a house.
3. Less Stringent Credit Score Requirements
For individuals who have a bad credit rating, either because they have been declared bankrupt, or have run into financial difficulties, getting a mortgage approved at favourable terms can be a difficult (if not impossible) proposition.
Even small blemishes to your credit score can significantly affect your home mortgage rates, which over the long term could translate to thousands of dollars.
4. Start Adulting Early!
Renting can allow you to learn to live independently and accumulate your finances, before you make the commitment to buy a property. Moreover, if you’re single and below the age of 35 but still want a place to call your own, then renting is a viable option. Purchasing a private property is out of reach to all but the wealthiest, and doing means forgoing grants for first-time buyers of HDB flats in future, which is a privilege of Singaporeans.
So, Rent or Buy?
Having said the above, there are many good reasons for buying a property, but that is by no means a uniformly good option for everyone. If any of the above four situations apply to you, then you might find that renting is a better choice.
If you choose to rent, be sure to read this article so you avoid paying for things you should not have to!