Whilst English is the lingua franca in Singapore, and our country is a melting pot of countless cultures and nationalities, the average Singaporean is still very much Asian at heart. Amongst other things, this entails living with your parents until you’re married (or you hit 35, and you’re finally able to purchase a flat).
You could always rent, of course. But Singaporeans typically dismiss the option of entering the rental market as not being cost efficient, with many likening it to “throwing money down the drain”.
Try looking at this same scenario with a different perspective, though, and it might make all the difference. Mr Ku Swee Yong, chief executive of International Property Advisor, for example, says that because the rental market is a tenant’s market as of now, it will be “difficult for property prices to hold up their value”. In his opinion, it’s worth renting for a couple of years, and waiting for property prices to fall.
Before you scream property blasphemy, here’s a specific example to illustrate Mr Ku’s point.
According to Mr Ku’s calculations, which are based on transactions from the first quarter from a condominium in Novena, the cost of ownership is higher than that of rental until the fourth or fifth year. This model assumes that the rental amount stays flat, and uses a highly conservative cost of ownership that excludes even the down payment and repaying the loan principal.
The bottom line? Unless you’re extremely cash rich and have the equivalent of what a down payment would cost, lying around in liquid cash, it might not be such a foolish decision to train your sights on the rental market. Before you write off renting an apartment completely, make sure you take into account both the low rental prices, and the opportunity cost of using your cash to finance a down payment.
Robert Kiyosaki from Rich Dad Poor Dad also provides an alternate point of view, saying that homes cannot be considered an asset.
The rationale behind this? According to Robert, it doesn’t matter whether a property appreciates in price. What homeowners should be looking at is whether their home provides cash flow every month. In essence, Robert says that it’s crucial to make your money “on the buy, not the sell”, and that as long as you live in your house and you’re not renting it out, a home should not be considered an asset.
Regardless of whether you agree with Robert’s point of view, one thing is for sure – prices have been falling across the board for both private residential and resale public segments. In fact, we’ve witnessed a consistent fall for private homes for 14 quarters now; this means that we’re currently experiencing the longest slump we’ve had in 13 years, according to data from the Urban Redevelopment Authority. Keeping this in mind, you’ll have to be an extremely optimistic soul to say with certainty that you’ll definitely make a profit on your property.
Changed your mind about renting in Singapore? If you’d like to get started, read our articles on common property renting mistakes, renters’ insurance, and what to look out for when you’re viewing a rental property. It’s time to find the bachelor/bachelorette’s pad of your dreams!