I just sold one of my properties yesterday.
The buyer is actually my tenant. They rented the place since last year. The idea was to wait for the property market to slow down before buying their own place.
Unfortunately, prices keep going up. They think I would most likely increase the rent when the tenancy expires next year. They really like my unit and decided to buy it — despite the fact that recent transacted prices of this condo have never been higher.
Should one buy or rent one’s own residence? There are pros and cons for either option.
From my observations, in general, I find Asians, Americans and Australians like to buy their own home. On the contrary, Europeans prefer to rent.
In Singapore, most locals prefer to buy because:
1) Many people associate getting married with settling down and buying their own place.
2) You can always renovate the unit to your own taste.
3) There is this abstract feeling of ‘home’, ‘ rooted’ or some call it sense of belonging.
4) The old thinking of owning a place after paying the installments, whereas monthly rental payments will be gone forever.
5) You can use CPF for down payment, installment, legal fee, etc.
Personally, I prefer to rent because of the flexibility it allows.
1) If I have money, I can move to a nicer place. When times are tough, I can settle for a more humble home.
2) Talk about relocating for work assignment or other commitment. When you leave the country, it may not be the right time to sell. It is also a hassle to find someone to manage the property on behalf of you.
3) Let the owner pay for installments, legal fee, stamp duty, renovation, repair, maintenance fee, property tax, etc. I just pay the rent and I can enjoy the place and all the facilities.
4) During bad times, I can bargain with the owner to lower the rent. You will be surprised how many Singapore landlords are ‘subsidizing’ the tenants to stay in their condo unit.
5) I don’t have to deduct a huge sum of down payment from my net worth. (Remember, personal net worth = assets minus liabilities minus own residence.) Money saved can be put in investments that promise high return. Continue building my net worth means one day I can buy any residence I like and pay in full.
In reality, ‘to rent or to buy’ is often not a personal decision, especially when you have a spouse or a family. Agree?
I’m caught in a bind about renting vs owning. I’ve been looking and waiting to buy for 5 years. The last home went en-bloc (amidst the en-bloc fever, our development got a really bad deal. but the majority agreed out of fear. sigh)
So in 2008/2009, we started our search. We decided to rent in the meantime. In our minds, we would only be renting for a year at most. But prices just seemed to escalate by the day! So here we are, still waiting after 4 years. And we’re wondering if the 4 years of rent money could have been better utilised. We’re hoping for this ridiculously big property bubble to burst soon.
I’m caught in a bind about renting vs owning. I’ve been looking and waiting to buy for 5 years. The last home went en-bloc (amidst the en-bloc fever, our development got a really bad deal. but the majority agreed out of fear. sigh)
So in 2008/2009, we started our search. We decided to rent in the meantime. In our minds, we would only be renting for a year at most. But prices just seemed to escalate by the day! So here we are, still waiting after 4 years. And we’re wondering if the 4 years of rent money could have been better utilised. We’re hoping for this ridiculously big property bubble to burst soon.
I empathized with your situation. I had two properties that residents wanted to go en-bloc during the en-bloc fever in 2008. I was secretly hoping that it wouldn’t go through. Not because I didn’t want the money, but for the fact that it’s more environmentally friendly to refurbish rather than demolish and rebuild a development.
Well, prices cannot go up forever. It may be frustrating now having to wait and cannot take any action you’ve had wanted. But remember: you only know whether renting (rather than buying) is a good decision many years later after you’ve seen what’s going to happen.
Say you are paying $36,000 a year now for rent and a total of $180,000 for 5 years. If you had bought a $1.8 million property, a 10% drop in future price means a $180,000 loss and 20% drop is easily $360,000. Still recall the 45% drop in property prices in 1998 Q4 from last peak and 29% drop in 2001 from previous peak? And you still haven’t added in the property purchase transaction costs, renovation, furnishing, mortgage interests, property tax, maintenance fee …
wow, your reply made me feel a whole lot better. and the figures kinda put my doubts in perspective.
i’m trying to learn about investing. and i’m enjoying your posts immensely. we often think that we know all there is to know about buying and selling property (being in a country obsessed with it).
and yet, i was caught in the frenzy and sentiment of the market. i, unfortunately, plonked some money down for a shoebox unit in 2010.
but i managed to sell it a few months ago. didn’t make a loss, but the gains i think were not great enough to justify the 2.5 years wait. but i’m glad that we managed to sell it anyhow.
which is why i decided to educate myself. guess it’s better now than never!
which brings me to your blog – it’s been enlightening and encouraging to read your posts.
kudos!
I empathized with your situation. I had two properties that residents wanted to go en-bloc during the en-bloc fever in 2008. I was secretly hoping that it wouldn’t go through. Not because I didn’t want the money, but for the fact that it’s more environmentally friendly to refurbish rather than demolish and rebuild a development.
Well, prices cannot go up forever. It may be frustrating now having to wait and cannot take any action you’ve had wanted. But remember: you only know whether renting (rather than buying) is a good decision many years later after you’ve seen what’s going to happen.
Say you are paying $36,000 a year now for rent and a total of $180,000 for 5 years. If you had bought a $1.8 million property, a 10% drop in future price means a $180,000 loss and 20% drop is easily $360,000. Still recall the 45% drop in property prices in 1998 Q4 from last peak and 29% drop in 2001 from previous peak? And you still haven’t added in the property purchase transaction costs, renovation, furnishing, mortgage interests, property tax, maintenance fee …
wow, your reply made me feel a whole lot better. and the figures kinda put my doubts in perspective.
i’m trying to learn about investing. and i’m enjoying your posts immensely. we often think that we know all there is to know about buying and selling property (being in a country obsessed with it).
and yet, i was caught in the frenzy and sentiment of the market. i, unfortunately, plonked some money down for a shoebox unit in 2010.
but i managed to sell it a few months ago. didn’t make a loss, but the gains i think were not great enough to justify the 2.5 years wait. but i’m glad that we managed to sell it anyhow.
which is why i decided to educate myself. guess it’s better now than never!
which brings me to your blog – it’s been enlightening and encouraging to read your posts.
kudos!
I am glad that you found the posts in my blog useful. Also thanks for your compliments.
Frankly, not many can make money from property investment, especially when they are investing for the first time. For me, although I am lucky to be profitable after selling my first property portfolio, I admit that there are many things I only learn after that. And I am still picking up new things now …
I am glad that you found the posts in my blog useful. Also thanks for your compliments.
Frankly, not many can make money from property investment, especially when they are investing for the first time. For me, although I am lucky to be profitable after selling my first property portfolio, I admit that there are many things I only learn after that. And I am still picking up new things now …
i disagree..
Buying a home and paying a mortgage is building up one’s equity. One can use the built up equity ( private only) to leverage for other assets like stocks or another property. Home loan is the cheapest loan.
Renting a home is building the landlord’s equity.
Of cos the above is a sweeping statement and depends on factors such as stage of economy, rent vs lease quantum and other quantitaive factors.
Renting or buying is a personal choice. But one’s own residence is not counted when calculating total net worth. It is still a personal liability if the housing loan is not fully paid up. Because it’s your residence, you can’t really benefit from it even if its value appreciates because you need a place to stay anyway.
You can spare the money to invest somewhere. But you must always ensure that you are making an investment with much higher return (and reasonably low risk) compared with the interest you are paying to the bank.
i disagree..
Buying a home and paying a mortgage is building up one’s equity. One can use the built up equity ( private only) to leverage for other assets like stocks or another property. Home loan is the cheapest loan.
Renting a home is building the landlord’s equity.
Of cos the above is a sweeping statement and depends on factors such as stage of economy, rent vs lease quantum and other quantitaive factors.
Renting or buying is a personal choice. But one’s own residence is not counted when calculating total net worth. It is still a personal liability if the housing loan is not fully paid up. Because it’s your residence, you can’t really benefit from it even if its value appreciates because you need a place to stay anyway.
You can spare the money to invest somewhere. But you must always ensure that you are making an investment with much higher return (and reasonably low risk) compared with the interest you are paying to the bank.