Should you buy or rent a home in Singapore?

If you’ve only got a minute:

• Buying a home offers long-term stability and investment potential while renting provides flexibility.
• 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.

Home ownership marks a significant milestone for many, often serving as an indicator of success and stability.

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

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

Here are the pros and cons of each option.

Buying: Building wealth and stability

1. Long-term security

Owning your home means you’re not subject to the uncertainties of rent hikes or the possibility of having to move out when your lease ends. This stability can be particularly reassuring for families looking to settle down, as it allows your children to grow up in a familiar environment, attend the same schools, and build lasting friendships.

2. Property appreciation

Singapore’s real estate market has generally shown strong performance, and owning a property here may be considered a wise investment. Over time, as the value of your home is likely to appreciate, you can earn a substantial return on your investment and boost your financial portfolio, serving as a tangible asset that may outpace inflation.

Read more: Should you invest in SG property

3. Potential retirement income

Retirees can consider unlocking the value of a home through renting out spare rooms, right sizing to a smaller property (particularly if the kids have flown the coop) or receiving cash proceeds from participating in the government’s lease buyback scheme.

4. A legacy

Some homeowners may wish to keep a family home as a legacy for future generations. If so, do ensure that there will be adequate funds to meet the property’s long-term operating and capital needs as well as contingency for unexpected costs so as not to place a burden on future family members.

5. Personalisation

Buying a house offers the freedom to personalise and modify your living space. Unlike renting where you may face restrictions, owning your home means you can renovate, design, and truly make it your own. Whether it’s a complete kitchen remodel or simply painting the walls your favourite colour, homeownership allows you to create a space that perfectly reflects your tastes and lifestyle.

Read more: How to build your dream home: Interior design trends for 2024

Buying: The flip side of high costs and commitment

While there are many advantages to buying a house in Singapore, it's essential to consider the potential drawbacks to make an informed decision.

1. High upfront cost

Singapore is one of the most expensive cities in the world, and the initial investment required to purchase a home can be significant. This includes the down payment, which is typically at least 20% to 25% of the property’s value, depending on whether you’re buying a HDB flat or a private property. Furthermore, consider additional costs such as stamp duty, legal fees, and renovation expenses. For many, this high entry cost can be a significant financial burden.

2. Long-term financial commitment

Another drawback is the commitment to a long-term mortgage. Taking out a home loan ties you to regular monthly payments over a lengthy period, often 25 to 30 years. This long-term financial obligation can limit your flexibility, especially if your personal or professional circumstances change, requiring you to relocate or reduce your expenses.

3. Market volatility

While property values in Singapore have historically appreciated, there are no guarantees. Market fluctuations can affect your property's value, potentially resulting in periods where it heads south. This risk is particularly relevant if you need to sell your property during a market downturn, which could result in a financial loss.

4. Eligibility to buy HDB flats

In Singapore, purchasing a HDB flat comes with specific requirements that can pose challenges. For families, there's a need to form a traditional family nucleus, meaning you must be buying with either your spouse, children, parents, siblings, or children under your legal custody.

Additionally, there are income ceilings to qualify for various HDB schemes, which exclude higher-earning households from these more affordable options.

For singles, the restrictions can be even more pronounced. You must be at least 35 years old to buy under the Singles Scheme, and even then, you're only limited to 2-room Flexi flats if you’re looking to apply for a BTO.

Furthermore, private properties tend to be very expensive for singles due to their single-source income, and they also lack access to the housing grants available to families. These criteria add to the complexity and can delay the journey to homeownership, especially for singles and those with unconventional family structures.

Read more: Single’s Guide to Buying a HDB Flat

Renting: Freedom and Flexibility

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

1. Lower initial financial outlay

Renting typically only requires a deposit and the first month’s rent. This makes it a more accessible option for those who may not have substantial savings or prefer to use their capital for other investments. Some rental homes are fully furnished so that you can move in directly!

2. Flexibility

Lease terms typically range from at least 6 months to 2 years, allowing you to choose a duration that best suits your situation. If you want to try different neighbourhoods without being tied down or if you are anticipating changes in your life such as a job relocation, renting provides the flexibility to move without the complexities and costs associated with selling a property.

3. Avoid maintenance and repair fees

In most rental agreements, the landlord is responsible for maintaining the property and handling any necessary repairs. This means you can avoid the unexpected costs and hassle of dealing with property upkeep, allowing you to budget more predictably.

Renting: Freedom and Flexibility

However, renting comes with its own set of challenges.

1. Lack of wealth creation

Renting means you’re not building any long-term wealth through property ownership. When you rent, your monthly payments go towards your landlord’s mortgage rather than contributing to an asset that you own. Over time, this can result in a significant opportunity cost, as you miss out on potential property value appreciation and the ability to use your home as an asset in your financial portfolio.

2. Financial and housing insecurity

When renting, you are subjected to the terms of your lease and the decisions of your landlord. Lease terms can change, rents can increase, and there is always the possibility that your landlord might decide to sell the property or not renew your lease. This lack of control can lead to uncertainty and the inconvenience of potentially having to move more frequently than you would if you owned your home.

3. Long-term cumulative costs

In addition, while renting can initially be more affordable, it can become more expensive over the long term. Rent prices can increase regularly, sometimes significantly, depending on the market and location. Over time, the cumulative cost of rent can exceed the cost of a mortgage, potentially making renting less cost-effective in the long run.

So, what’s the verdict?

Ultimately, the decision to rent or buy depends on your personal circumstances. Here are 3 key factors to consider.

Financial considerations

Can you afford the upfront costs of buying? Remember to factor in the downpayments, stamp duties, and other initial expenses.

Are you comfortable with the responsibilities of homeownership? Homeownership requires a stable income to manage mortgage payments and maintenance costs.

Future plans

What are your future plans? If your life is likely to change dramatically soon, renting might be the safer bet, allowing you to adapt more easily without the burden of selling a home.

How long do you plan to stay? If it’s less than 5 years, renting might also make more sense.

Financial stability

Are you looking for flexibility or stability? Renting offers more freedom to move, while buying provides long-term security. It’s essential to evaluate your job security, potential career changes, and overall financial health before committing to a purchase.

Remember, there’s no one-size fits all answer. What works for your friend or colleague may not be the best option for you. 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.

Deciding between buying and renting a home in Singapore involves careful consideration of both the financial and personal implications. Whether you choose to buy or rent, aligning your choice with your financial goals, lifestyle preferences, and future plans is key to ensuring that you make the best decision for your unique situation.

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.

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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.

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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.