For those accustomed to thinking of renting as an egregious waste of money, this may come as a surprise. Let’s examine the reasons why Singaporeans are turning to, and staying in, the red-hot rental market.
Study: Not Enough Savings, No Cheaper Options, and More
One of the top reasons young Singaporeans turn to the rental market is cost. For some, it is the only way they can afford to move out of the family home since a property purchase is out of their reach, especially for most singles just starting out in their careers.
The PropertyGuru Singapore Consumer Sentiment Study H2 2022 found that insufficient savings to purchase property was the top reason younger Singaporeans turned to the rental market. The 22 to 29 age group displayed this sentiment most strongly.
This is unsurprising as young, unmarried Singaporeans are essentially locked out of the HDB market, which requires them to apply as a couple or family unit, or wait until they turn 35.
The only option for unmarried Singaporeans under 35 looking to buy property is to turn to the private property market.
However, private property is prohibitively expensive for many.
While renting can seem like the most economical choice in the short term, in the long run the money spent on rent adds up, and to make matters worse, rental prices have been on the rise.
According to the PropertyGuru Singapore Consumer Sentiment Study H2 2022, 1 in 3 renters is feeling affected by rising rental prices, pushing many to search for cheaper rental accommodation. 36% of the respondents who answered this question said they felt the pinch but could not find a cheaper home than their current rental accommodation, while 34% said they were looking for a cheaper place to rent.
38% of the married couples with kids who were renting accommodation said they were looking to purchase a property sooner due to the rise in rents. This group has relatively easy access to subsidised housing as they are eligible to buy BTO flats.
Reasons on When Renting Makes Sense
While there are many good arguments for homeownership, in some situations renting can be a smarter choice, especially for young Singaporeans who are eager to live independent lives.
1. Less of a Financial Commitment than Buying
Although paying rent is a financial burden, renting a property is less of a financial commitment than buying one. Those who commit to buying property are usually signing up for years or even decades of debt.
The upfront costs of buying a property are also extremely onerous and require the buyer to save up for a sizeable downpayment. By contrast, the upfront costs of renting, which may include a deposit and the first month’s rent, are much lower.
Buying a home usually requires that you live in it on a long-term basis. For instance, HDB flat owners are required to live in their flats for a Minimum Occupation Period (MOP) of at least five years. This means that if the buyer gets a job that requires them to travel to the other side of Singapore, they will not be able to move to a more convenient location.
Renters, on the other hand, are bound to their homes only for as long as their leases, and may also have the possibility in some situations of terminating the lease on short notice. This gives them the freedom to move house or even leave Singapore if they wish.
This flexibility also allows growing households to upgrade their rental homes whenever their needs change. Those who buy property will have to go through the long process of selling their property and looking for a new one.
If you need urgent accommodation, renting is a much faster process than buying. In most cases, the tenant can sign the rental tenancy agreement and move in almost immediately. Those who do not want to invest in furniture and appliances can even opt for the convenience of a fully-furnished rental home.
Those purchasing resale property, whether HDB or private, typically require at least three months for the transaction to be completed. This does not include time spent searching for a suitable property, attending viewings and waiting for market prices to be favourable.
4. Simpler in Terms of Paperwork
For those looking to move into a new home fast, rental accommodation offers greater speed and flexibility. Finding rental accommodation in Singapore is not difficult, and mainly requires tenants to sign a rental agreement and pay a deposit.
There is much more paperwork involved when it comes to purchasing a home, including making loan arrangements, which could require furnishing proof of income. In addition, those looking to buy an HDB flat will have to jump through additional hoops, including submitting an application to and attending appointments with the HDB.
5. No Need to Worry about Maintenance
In many cases, the burden of maintaining rental property falls upon the landlord. Tenants thus do not need to worry about rectifying normal wear and tear. Issues such as leaks in the ceiling or ageing wall paint are usually the responsibility of the landlord, who agrees to bear the cost.
It is, however, important to look at your rental contract so you know what exactly your landlord should be responsible for.