So you don’t recall what happened after last night’s pub crawl, but the old bachelor pad is a smoking wreck. Or your buddy won’t let you crash for the fourth year running, and your girlfriend’s now your fiance. Whatever the case, you’re facing the big question: rent or buy?
Right now property prices are so high you’ll need a ladder to check them. Before making a decision, you’d better have a look at Moneysmart’s list of pros and cons. Your house is probably going to be the biggest purchase you ever make, so think it over.
If you’re not certain about settling down, don’t buy. If you’re an expat and you’re only thinking about living here temporarily, rent instead. Buying a house is like getting married: a major commitment you’ll never escape from, however attractive it may seem at first.
Also, understand how freehold and leasehold properties work in Singapore. Freehold properties will cost more, because once bought, the land is yours in perpetuity. Leasehold properties are a lot cheaper, but the land is repossessed by the state after a fixed period.
Leasehold properties decrease in value by about 1.5 percent each year, whereas freehold properties appreciate. Be warned however, the rate of appreciation is highly unpredictable, so don’t count on it!
And if you do buy, don’t just look at the interest rates of the home loan. Ask the seller if you will need to pay for surveys and appraisals; they’re sometimes negotiable. See if you can negotiate for a lower interest rate. Remember that over a 15 or 30 year period, a reduction of less than one percent interest can save you tens of thousands of dollars. There are also free services that will help you compare home loans and negotiate for better rates on your behalf.
The Upside of Renting:
– It’s cheaper all around. You need a smaller initial deposit, and there aren’t fees for surveying or appraisal.
– You won’t be caught in a jam if your financial situation changes. In the event of job loss or medical emergencies, the last thing you want is to be saddled with a mortgage.
– You have fewer obligations. If a sewage pipe bursts or something, it’s not your problem. Well, actually it is, because your living room will smell like a sewer. But your landlord will pay for it.
Renting Cons: The Ugly Truth
– The money that you’re paying is going nowhere. It’s not bringing you closer to a home, it’s not invested, it’s not doing anything. The rental fees are just a financial vampire, sucking your wallet dry (It’s like paying for Twilight movie tickets again and again, sucker!).
– The landlord might decide to up your rent on a whim. Or maybe he’ll get tired of the bursting sewer pipes, and just sell the place. Whatever he does, you have no control over it.
– Also, rental payments are not tax deductible.
– Most importantly, you can’t do as you please, in your own residence! Forget about that “urban-industrial-caveman” vibe you wanted. The landlord’s old, crotchety, and makes you vomit yellow wallpaper is now part of your everyday view.
– Sooner or later, it’s going to be your house. A fully paid home is the ultimate provision for your children or loved ones.
– There is no Capital Gains Tax (CGT) in Singapore. In other countries, you might have to pay CGT when you sell your house, and that can eat into the profit margin. The lack of CGT is a huge incentive to buy here.
– Your monthly payments, installments and property taxes are all tax deductible.
– If you keep an eye on the stock market, you may be able to buy low and sell high. Likewise, houses can appreciate in value quite suddenly. And if it depreciates, well you’ll still have a home.
– Property values rise faster than inflation. Using my psychic powers, I predict that the future will hold…more people and less space. See what I’m getting at?
– It’s your house. It’s like, illegal to force you to move out. And you can do whatever you want with it, whenever you want. Yes, you can change those wallpapers.
– It’s an immobile asset. Yeah, I know it seems obvious but don’t roll your eyes just yet. If you buy a house and you need to move suddenly, you could be staring at a massive financial loss. Understand that buying a house means tying yourself to a geographical spot for a long time.
– You will have to pay property taxes.
– Did I mention it’s an inescapable commitment? If you rent a house and things don’t go well, you can always pack up and leave. If you buy a house and things don’t go well, you’re still saddled with that mortgage. There’s no “look for a cheaper apartment” option.
Are you planning to buy or rent? Comment and let us know!
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