Is it possible for renting to be better than buying your own property?
In this article, we explore the pros and cons of renting. Besides your own financial goals, we have to consider your lifestyle needs and the time horizon.​​
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Assumptions we make:
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Renting a 3 bedroom unit for $4,500 per month
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Buying a 3 bedroom unit for $1,500,000
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Singaporean household, both husband and wife are 35 years old or younger
We explore 3 benefits of renting:
Lower Upfront Costs
​When you rent, you only have to pay an upfront security deposit of 1 to 2 months, subject to the length of the tenancy signed. There is no down payment, stamp duties or other transaction fees to worry about.​
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Buy: Rent:
​ Downpayment (20% Cash/CPF): $300,000 Security Deposit (2 months): $9,000
Downpayment (5% Cash): $75,000 1st Month Rental: $4,500
Buyer Stamp Duty: $44,600
Upfront Payable: $419,600​ Upfront Payable: $13.500
Bank Loan (2.5% PA, 30 years): $1,125,000
Monthly Installment: $4,445
Flexibility and Short Term Plans
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Ideal if you might want to change jobs, move overseas, or want to try living in different locations.
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Based on lifestyle priorities, you might want to stay in a particular area for a shorter period of time.
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Eg. If you want your child to enter a certain primary school and you wish to gain priority admission, thus, you have to meet the 30-month stay requirement.
Free from the Hassles of Maintenance
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Any major repairs or faults are the responsibilities of the landlord, this includes any parts replacement or repairs for the air-conditioning units, water heaters, plumbing etc.
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The monthly maintenance fees which can range from $300 to $800 or more (depending on factors like size, age, amenities and the number of units) are also paid by the landlord.
Summary of Costs of Buying versus Renting
​​​​Buy: Rent:
​ Downpayment (20% Cash/CPF): $300,000 Security Deposit (2 months): $9,000
Downpayment (5% Cash): $75,000 1st Month Rental: $4,500
Buyer Stamp Duty: $44,600
Upfront Payable: $419,600​ Upfront Payable: $13.500
Bank Loan (2.5% PA, 30 years): $1,125,000
Monthly Installment: $4,445
Maintenance Fees: $400
Property Tax (est): $250
Monthly Payable: $5,095 Monthly Payable: $4,500
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After 5 years / 60 months:
​ Total Paid: Total Paid (factoring in 3% increase in rent):
- $5,095 X 60 = $305,700 - $4,500 X 12 = $54,000
- $4,635 X 12 = $55,620
Assuming 15% increase in price (approx. 3% per year): - $4,774 X 12 = $57,288
$1,500,000 X 115% = $1,725,000 - $4,917 X 12 = $59,004
Bank Loan Balance: - $990,848 - $5,064 X 12 = $60,768
Downpayment Paid: - $375,000 $286,680
Buyer Stamp Duty Paid: - $44,600
Proceeds* (Cash/CPF): $314,552
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​While it could be more costly to buy, you are building equity. However, you will be incurring high upfront costs and also subject to market risks and fluctuations. The example also shows that you stand to gain if there is sufficient capital appreciation.​
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* Proceeds include the equity portion paid during the 5 years / 60 months period of ownership
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We started our own home buying journey more than 7 years ago. Through our own home buying process, we know that it can be an exciting yet challenging process.​
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We understand that everyone's circumstances and objectives are different so we offer a customised solution for each of our buyers. Our consultancy service combines the use of data and our years of experience to walk with you through your home buying journey.
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Let us meet up for a more detailed financial calculation for you!