There are various factors to consider when deciding whether to rent or buy a property in Singapore (e.g. cost of living, expenses that comes along with renting or purchasing, duration of stay etc.). Let’s explore these factors as well as the advantages and disadvantages of buying versus renting a property in Singapore.
If you’re a foreigner in Singapore, it might be worthwhile to note that there are limitations on the type and amount of properties that foreigners can buy in Singapore. There are also additional taxes and fees applicable to foreign buyers.
Factors to Consider
1. Flexibility or Length of Stay
Renting provides greater flexibility as compared to owning a property. If you might be relocating to another country in the near future, renting allows for easy mobility without the burden of having to sell your property. Also, if you decide to move around Singapore, finding a new rental property is much simpler than selling your current home and buying a new one. This flexibility is particularly advantageous for individuals unsure about the duration of their stay in Singapore.
However, it’s important to note that rental agreements usually have a minimum term, and terminating a lease early can result in significant financial penalties. Rental prices may also increase over time, affecting your monthly budget.
2. Total Cost
When it comes to renting, do consider costs such as the monthly rent, utility bills, furniture rental or parking fees. On the other hand, buying a property involves the down payment, mortgage payments, stamp duty, legal fees, valuation fees, property taxes, and maintenance costs such as repairs and renovations.
While renting may have a lower monthly cost initially, it’s crucial to remember that it doesn’t offer the opportunity to build equity or benefit from long-term property value appreciation.
3. Tax Implications and Regulations
Foreigners are subject to additional taxes and fees when purchasing property in Singapore, including stamp duty and the additional buyer’s stamp duty (ABSD). The ABSD for foreign buyers is currently 60% of the property purchase price, although there are ABSD remissions for certain nationalities.
In addition to the ABSD, foreign buyers may also be liable for the seller’s stamp duty (SSD), which is a tax imposed on property sales within a specified period after the purchase (SSD will not apply anymore after three years from the purchase date).
4. Long-Term Plans
Lastly, it’s important to consider the long-term financial implications of your decision. Renting doesn’t offer the opportunity to build equity through your property or benefit from property value appreciation. On the other hand, purchasing a property allows for equity accumulation and the potential for a return on investment through property value appreciation over time. Ownership also provides a sense of stability and security that renting may not offer.
You Can Consider Renting If…
- You prefer not to commit to long-term ownership, as renting allows for easy transitions between properties. This is particularly relevant for foreigners who are unsure about their long-term residency plans in Singapore or those who frequently need to relocate for work or other reasons
- Affordability is a key consideration. Renting is often more affordable than buying, especially for foreigners who face additional taxes and fees when purchasing property. It eliminates the need for a large down payment and ongoing maintenance costs, making it a more accessible option for those not yet financially ready to buy
- You do not wish to worry about property maintenance and repairs. Renting shifts the burden of these tasks to the landlord, which is beneficial for foreigners unfamiliar with the local property market or lacking experience in property maintenance. Renting also eliminates the need to worry about property insurance, as that responsibility will typically fall on the landlord
You Can Consider Buying If…
- You seek a long-term investment with stable and appreciable returns. For foreigners planning to reside in Singapore for an extended period, buying property can be a wise financial decision. The country’s property market has a strong track record of steady growth, which is expected to continue in the future. This stability and growth make buying property in Singapore an attractive investment option for foreigners.
- You want to enjoy property-related tax benefits. Foreigners who purchase property in Singapore may be eligible for deductions on mortgage interest and property tax, significantly reducing homeownership costs. Moreover, owning property in Singapore provides opportunities to leverage favorable tax laws, such as exemptions on capital gains tax and property tax rebates, further enhancing return on investment.
- You desire the ability to personalize living spaces according to individual preferences and tastes. Unlike renting, where modifications and renovations may be restricted, homeowners have the freedom to make changes to their property. This is particularly important for foreigners who have relocated to Singapore and wish to create a comfortable and familiar living environment. Whether it involves customizing cabinetry, adding a home office, or undertaking a complete renovation, owning a property offers the freedom to make the living space truly your own.
- You value control over your living situation. By choosing the location, size, and type of property, as well as the option to rent it out or sell it as needed, property owners in Singapore have the ability to make decisions that suit their specific needs and circumstances. This added control over the living situation allows individuals to tailor their housing arrangements to meet their unique requirements and goals.
Final Thoughts
Indeed, to rent or to buy is a complicated decision with multiple factors to be taken into consideration. While renting provides flexibility and eliminates the burdens of ownership, buying a property can offer long-term financial advantages.
Ultimately, it depends on each individual’s circumstances and priorities, such as financial stability, lifestyle aspirations and preferences. It would be good to seek guidance from a professional to have a comprehensive understanding of the potential pros & cons associated with each decision.
If you require further guidance on your property purchase journey, please do not hesitate to contact us. We are always happy to assist you.
If you found this article helpful, you may also be interested in our previous piece titled “Are You Paying The Right Price For Your Property?”