Should you buy or rent a home?

By Jermaine Koh

If you’ve only got a minute:

• Buying a home offers long-term stability and investment potential while renting provides flexibility and higher liquidity.
• Assess your financial capacity, including the ability to afford upfront costs and ongoing expenses for homeownership.
• Factor in your future plans and lifestyle preferences when considering whether to buy or rent a home.

Singapore's property market in 2024 has shown a mix of trends, with both the rental and buying sectors experiencing notable shifts.

Whether you’re a potential homeowner considering a major investment or a tenant who values flexibility, understanding the main differences between owning and renting is essential to make the best housing decision based on your situation.

Rental market outlook

Singapore's rental market shows resilience in late 2024, with HDB rents climbing 0.4% in November, particularly driven by 4-room flats. While the year-to-date rental price increase of 4% is more moderate compared to 2023's 10.1% growth, the market remains stable.

Private condominium rentals experienced marginal growth of 0.2%, with the Outside Central Region (OCR) performing strongest.

Looking ahead to 2025, industry experts anticipate a continued market recovery, projecting private rental growth between 2% and 4%. This optimistic outlook is underpinned by improving economic conditions, expanding employment opportunities and constrained rental inventory.

The HDB rental market is expected to face upward pressure due to fewer flats reaching their Minimum Occupation Period (MOP), which could potentially limit supply and support rental price stability.

Home purchase market outlook

Singapore's home purchase market showed mixed signals in late 2024, with private housing sales increasing 25% in Q4 but with overall 2024 sales remaining below recent averages.

HDB resale prices continued to rise, albeit at a slower 2.5% pace in Q4, influenced by policy measures like reduced loan-to-value (LTV) limits.

The 2025 outlook is cautious due to economic uncertainties, elevated interest rates and potential trade restrictions. Despite expected US Federal Reserve rate cuts, domestic mortgage rates are likely to remain higher than in previous years.

Million-dollar HDB flat transactions decreased, possibly due to increased interest in condominiums and ECs.

Potential buyers are advised to approach the market carefully, considering both opportunities and risks in the light of economic conditions and policy changes.

Ultimately, the decision to buy or rent a home in Singapore is influenced one’s personal financial situation, lifestyle, and long-term goals.

Here are the pros and cons of each option.

Buying: Building wealth and stability

Pros	Cons
Long-term security and stability	High upfront costs (down payment, stamp duty, etc.)
Potential property appreciation	Long-term financial commitment (25-30 year mortgage)
Building wealth through equity	Market volatility risks
Potential retirement income source	Maintenance and repair responsibilities
Freedom to personalise and renovate	Eligibility restrictions (especially for HDB flats)
Legacy for future generations	Less flexibility to relocate
Protection against rent increases	Property taxes and insurance costs
Potential rental income	Potential for negative equity if property values decline

 

Homeownership provides stability for families, allowing children to grow up in a consistent environment. It also offers financial benefits such as protection against rent increases and the potential for rental income. You can also renovate, design and personalise your home as you wish.

For retirees, a home is a valuable asset, providing options for income through renting out the home or rooms, right-sizing to a smaller home or selling a portion of the lease back to the government via the lease buyback programme.

However, the decision to buy a home comes with significant challenges such as high upfront costs, long-term financial commitment, market volatility risks and potential eligibility restrictions. You should carefully evaluate your personal circumstances, financial capabilities and long-term goals before committing to buying a home.

Renting: Freedom and flexibility

Renting a house comes with its own set of advantages that can make it an appealing option for many people.

Pros	Cons
Lower initial financial outlay	Lack of wealth creation through property ownership
Flexibility to move or change locations	No equity building
Avoid maintenance and repair costs	Potential for regular rent increases
Predictable monthly expenses	Housing insecurity (lease non-renewal, property sale)
Access to areas you might not afford to buy	Limited control over property modifications
No exposure to property market risks	Missing out on potential property appreciation

 

Renting offers financial flexibility, higher liquidity and reduced responsibilities, providing easier access to housing with lower initial costs and the ability to relocate easily. You can avoid maintenance fees and enjoy more predictable monthly expenses, making it an attractive option, especially if you value mobility.

However, renting comes with significant long-term drawbacks, including no wealth creation, potential housing insecurity and missed opportunities for property appreciation. The lack of equity building and vulnerability to rent increases make renting less financially advantageous compared to homeownership.

Comparison of buying vs renting a 4-bedroom HDB flat in Bishan

Rent

Renting
One-off costs	S$7,000
Deposit (usually 1 to 2 months)
Recurring costs
Rent	S$3,500

 

The median rental price of S$3,500 represents only the base monthly rent. This figure does not include additional living expenses.

These supplementary costs can vary significantly depending on your lifestyle, personal preferences, and consumption patterns. You should factor in these potential variations when budgeting for rental accommodation, as they can materially increase the total monthly housing expenditure.

Buy

Property price: S$730,000 (Q32024 4-room HDB flat median resale price)

Buying
One-off costs
Downpayment (25% of property value)	S$182,500 HDB loan: Cash and/or CPF Bank loan: 5% downpayment in cash only
Recurring costs
Mortgage repayment (assuming interest is 3.75% p.a. and 25 years bank loan tenure)	S$2,815

 

It is important to note that the monthly mortgage repayment (bank loan) of S$2,815 represents only the base loan repayment and does not include additional homeownership expenses.

Legal fees, stamp duty, property tax, insurance, maintenance charges, renovation, home insurance, utilities and broadband services can significantly increase the total cost of owning a property. 

Although the monthly cost of buying a home appears to be slightly lower than renting in Bishan, with a difference of about S$685/month, the abovementioned costs can add up to a substantial amount each month, potentially making the total monthly cost of ownership higher than renting.

When buying a home, you can use your CPF OA contributions to offset mortgage payments instead of cash. In contrast, rent is deducted from your take-home salary after CPF deductions.

This difference in payment methods can result in homeowners having more disposable income compared to those who rent, despite similar housing costs.

So, what’s the verdict?

When considering whether to buy or rent, different profiles may find one option more suitable than the other.

Here's a breakdown of who might be better suited to buy or rent:

Buying		Renting
Stable income earners	Individuals with secure, long-term employment and a steady income are well-positioned to manage mortgage payments and maintenance costs.	Career nomads	Professionals anticipating job changes or relocations in the near future might find renting more flexible.
Long-term planners	Those intending to stay in Singapore for more than 5 years can benefit from potential property appreciation.	Short-term residents	Expatriates or individuals planning to stay in Singapore for less than 5 years may find renting more practical.
Family-oriented individuals	Couples planning to start a family or those with children may prefer the stability and customisation options that come with homeownership.	Young professionals	Singles or young couples still exploring career options and lifestyle preferences may benefit from the flexibility of renting.
Financial optimists	Those confident in Singapore's economic growth and expecting interest rate cuts in 2025 might find it an opportune time to invest in property.	Market watchers	Individuals who are uncertain about future property trends or interest rates might choose to rent while monitoring the market for better buying opportunities.

 

Remember, there’s no one-size fits all answer. Take the time to crunch the numbers, consider your lifestyle and future plans and don’t be afraid to seek advice from financial experts or real estate professionals.

Start Planning Now

Check out DBS Home Marketplace to work out the sums and find a home that meets your budget and preferences. The best part – it cuts out the guesswork.

Start Planning

Alternatively, prepare yourself with an In-Principle Approval (IPA), so you have certainty on how much you could borrow for your home, allowing you to know your budget accurately.

Apply In-Principle Approval

Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.