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Renting Or Buying A Property: Which Has Become More Expensive In 2022 With Interest Rate Rising

Everyone needs a home

With homes in high demand in Singapore, the question of whether to rent or buy a property has never been so debated. Homeownership in Singapore is high at 88.9% in 2021. Owning a home is so much a way of life in Singapore that buying a BTO flat is a Singaporean way of proposing marriage.

Yet, renting has become more commonplace in recent years. This is in part because of the prevalence of working from work and finding out that the family home is too cramped to be conducive and having your moving plans derailed due to construction and renovation delays. Moving out of the family before marriage is also more socially acceptable, especially if there are space constraints. Thus, it is entirely possible that you face the question of whether to rent or buy a property to stay in, whether you are single or married, young or not-so-young.

With both resale prices and rental prices making new highs and rising interest rates, the choice between renting or buying a property isn’t so straightforward. After all, even property owners are paying more for their housing purchases and monthly repayments.

Note: for this article, we will focus on 4-room HDB flat as the property of discussion. At the time of writing, HDB is still updating their Flat Portal Calculators to account for the latest cooling measures. The computed figures may differ slightly from the actual figures.

Read Also: Pros And Cons Of Renting VS Buying A Studio Condominium Apartment

Renting Requires Lower Cash Outlay

When it comes to cost, the most obvious difference in renting vs buying is the cost outlay.

Renting only requires us to pay the monthly rental as well as set aside the deposit which is typically a month’s rent for a one-year rental contract. This means that you can move into a new home as soon as you save up enough for two months’ rent or about $5,000 for the privilege of living in a rented 4-room HDB flat.

In contrast, buying a 4-room HDB flat will cost you between $430,000 to $972,500 depending on the estate, or about $575,000 on average. In terms of cash outlay, assuming we are able to take the maximum loan (80% Loan-To-Value (LTV) for HDB loan), this means that we need to set aside $115,000 in downpayment, which can be paid by cash or CPF OA savings. Additionally, we will have to pay $11,850 in stamp duty and about $ 1,226 in legal fees (assuming we engage HDB to act for us). This cost outlay doesn’t include the cost of renovations or furnishing which can be $45,000 for renovating a 4-room flat and $6,000 for furnishing.

Renting: $5,000 or 2-months rent for 4-room HDB flat. Excludes furnishing cost (~$6,000)

Buying: $128,076 for downpayment, stamp duty and legal fees. Excludes renovation cost (~$45,000) and furnishing cost (~$6,000)

Read Also: Guide To The Cost Of Renovating An HDB Flat In Singapore

Renting Requires Lower Commitment

Renting also offers more flexibility and less commitment. For those of us who are uncertain about our next stage in life (maybe we are considering a career that may require long overseas stays or contemplating marriage) or just not sold on the location of where we are staying, renting can be a good solution as it offers us a relatively stable residence without too much of a commitment. The minimum lease for rentals in Singapore can be as short as 3 months for private residential properties or 6 months for HDB flats.

Conversely, buying a property is a commitment. While we aren’t necessarily tied to the same property for life, most people have to take on a housing loan to buy their homes. The typical tenure for a housing loan in Singapore is 25 years. This doesn’t mean we are stuck with the same house for 25 years: we can always choose to pay it off earlier or sell. Even if we choose to sell, we have to abide by the 5 years minimum occupation period (MOP) for HDB flats. This means that at its shortest, buying is a commitment of 5 years.

Renting: 6 months minimum

Buying: 5 years minimum

Read Also: 6 Lesser-Known Facts About Minimum Occupation Period (MOP) For Singaporeans

Buying Allows You To Build Equity And Capture Capital Appreciation

For generations of Singaporeans, buying real estate has been the way to build wealth. Buying a property is a real asset that can appreciate even in times of inflation. Capital appreciation is truer if we buy a new BTO flat. Older resale flats that face significant lease depreciation may find capital appreciation harder to achieve.

Buying does allow us to build equity as we pay off our loans gradually. Unlike most other items we buy, our homes tend to retain their value better. Private property owners can tap on the equity of their homes via home equity loans while HDB flat owners can use the HDB Lease Buyback Scheme to unlock the value of their flats.

In contrast, renters don’t have this option. The advantage renters have is the flexibility of investment. Instead of being locked into a single property, renters can take the savings they have (especially the significant difference in initial cash outlay) and invest them in various investment opportunities.

Renting: Invest the difference

Buying: Build equity through property

Read Also: Lease Buyback Scheme, Right-sizing Or Rent Out A Room? Which Is The Ideal Option For Retirees Looking To Increase Passive Income

Buying Has Additional Costs Like Stamp Duties While Ownership Also Has Ongoing Costs

With renting, budgeting is simple – you just set aside the fixed cost of rent every month. Depending on your tenancy agreement, this may or may not cover costs like utilities, electricity and even home broadband. In most cases, if the washing machine breaks down, we can call the landlord or agent to fix it.

However, buying incurs additional costs. Not only do buyers have to pay for the purchase prices of the property, but they also incur stamp duty and legal fees. They would likely also have to fork out cash for things like deposits for utility accounts or set up costs for broadband service. Additionally, as homeowners, we are also responsible for the upkeep and maintenance of our own homes. If the washing machine breaks down, we have to source and replace it on our own.

Renting: call the landlord for repairs and maintenance

Buying: fix it on our own or hire someone for repairs and maintenance

Buying Allows You To Use Your CPF Monies

One thing that surprises most foreigners is the prevalence of homeownership in Singapore. In many countries, renting is quite common, not just because of cultural norms but also because it may make sense financially for certain groups of people. However, most international discussions on renting vs buying will omit this uniquely Singaporean situation: Singaporeans can use our CPF monies to pay for housing loans.

As Singaporeans, we all have to contribute to our CPF. For most of us aged 55 and below, this is 17% of our monthly wages. As we are allowed to use our CPF OA savings to pay for housing-related costs like downpayment, stamp duty and mortgage repayment, a lot of the cost outlay that differentiates renting and buying is minimised as we don’t need to use cash.

On a monthly basis, homeowners can also use the amount that is contributed to our OA to pay our monthly mortgage. However, as a renter, we would have to pay our rent out of our take-home salary (after deducting our CPF contributions). This means that buying a property actually gives homeowners more cash at their disposal.

Renting: Pay rent in cash

Buying: Pay mortgage repayments in cash or CPF monies.

Is Renting Or Buying A Property More Expensive?

If we take a scenario of renting or buying a 4-room HDB flat in Ang Mo Kio, here’s the estimated monthly cost breakdown.

Median rent in Ang Mo Kio for 2Q2022 is $2,400 for a 4-room HDB flat. Let’s assume that this doesn’t include utilities. This is $135.30 on average in Aug 2022, with gas, based on SP’s national average household consumption. We also add on the cost of paying for home broadband subscription which is about $50, based on our Complete Guide To Choosing The Best Broadband Plan For Your Home.

One-off cost  
    Deposit $2,400
Monthly cost  
    Rent $2,400
    Utilities including gas $135.30
    Broadband $50
Total $ 2,585.30


Median resale prices in Ang Mo Kio for 2Q2022 is $515,000 for a 4-room HDB flat. The estimated downpayment, stamp duty and legal fees would cost about $12,000. Assuming we earn the maximum household income of $7,000 that is allowed for HDB loan, the maximum HDB loan we can take is $437,700.

One-off cost  
    Downpayment $103,000
    Stamp Duty $10,550
    Legal Fees $1,434.50
    SP Account Deposit $100 (non-GIRO)
    Gas Supply Turn-On $117.70
    NLT Service Activation Fee (for Home Fibre Broadband) $56.71
    Total $115,258.91
Monthly cost  
    Mortgage $1,870
    Utilities including gas $135.30
    Broadband $50
Total $2,055.30


However, if we take a bank loan, we would be subject to the 75% LTV limit of which at least 5% downpayment must be paid in cash. This means we can borrow less money and will have to pay more in downpayment. Additionally, legal fees will be more expensive as HDB is unable to represent us in the conveyancing process.

Given the current rising interest rate environment, mortgage rates are also likely to increase if we are on an existing floating rate or take up a new loan package. The current range of mortgage rate is about 1.66% to 3.15%, with most being around 2.70%. Even if interest rates rise to 4.2%, the mortgage repayment will be $2,082. However, as interest rates rise, we will have to relook at our housing purchase and loan package as the monthly repayment may exceed the 30% Mortgage Servicing Ratio (MSR) based on an income of $7,000.

One-off cost  
    Downpayment $138,850 (of which 5% downpayment must be made in cash)
    Stamp Duty $10,550
    Legal Fees $2,500 (estimated)
    SP Account Deposit $100 (non-GIRO)
    Gas Supply Turn-On $117.70
    NLT Service Activation Fee (for Home Fibre Broadband) $56.71
    Total $152,174.41
Monthly cost  
    Mortgage $1,772 (at 2.70%) or $1,862 (at 3.15%)
    Utilities including gas $135.30
    Broadband $50
Total $1,957.30 or $2,047.30


Read Also: Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR): How Much You Can Borrow When Buying An HDB Flat

Buying A Property Is Cheaper If You Can Afford The Upfront Costs

On a monthly basis, renting in Singapore is expensive. Not only do you have to fork out cash (not CPF monies) for rent, but the monthly repayments are also higher than taking out a mortgage.

However, not everyone can afford to buy a property, the upfront costs can be prohibitive. Additional, HDB properties (even resale properties) have restrictions that may stop us from buying a property that we can afford. Thus, the choice between buying and renting depends on your own personal circumstances.

If you are planning to buy a property, it may be both exciting and daunting to plan your first home purchase. Having a good, trusted broker like our friends at RedBrick can give you peace of mind, knowing that you will always get the best rates out there and enjoy unparalleled service.

The best part? The service is free for you since brokers like them receive their commissions from the banks. Whether you want the best loan rate or just someone to walk you through the process, feel free to get a non-obligatory quote and consultation.

Simply fill in the contact form and an experienced Redbrick mortgage specialist will be in touch with you for a non-obligatory consultation.

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