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Rent or Buy Before 35 — Which Makes More Financial Sense?

More singles in Singapore are seeking more space and privacy during the pandemic and looking for their own place. But the costs can add up. If you are 35 and under, does it make sense to rent, or even buy a house?

Here’s how both options stack up against each other.

Cost of renting

Rents have increased in recent months due to demand. In September this year, HDB rental prices rose by more than 8% from the year before.

However, prices depend on the flat’s location — whether it is in a mature or non-mature estate, its proximity to amenities and public transport — as well as the size of the flat.

Here’s how HDB rental prices across different towns in Singapore were in the third quarter of 2021:

Median Rents for 3-Room and 4-Room Flats (3Q2021)

Town3-Room4-Room
Tampines$1,850$2,200
Bukit Panjang$1,680$2,000
Queenstown$2,000$2,750
Punggol$1,950$2,000

Source: Housing and Development Board

Unsurprisingly, flats in centrally located Queenstown had the highest rents. Towns further out commanded lower rents, especially for 4-room flats.

Private housing rents in September were similarly 8% higher from the previous year.

Here’s how private housing rental prices across different towns in Singapore were in the third quarter of 2021:

Median Rents for 3-Room and 4-Room Private Homes (3Q2021)

TownMedian Rent Per Square MetreSample Rent for
1 Bedroom 1 Bathroom
Q Bay Residences (Tampines)$33.33$2,000
The Tennery (Bukit Panjang)$35.34$2,200
Commonwealth Towers (Queenstown)$55.81$2,800
Parc Centros (Punggol)$34.86$2,300

Source: Urban Redevelopment Authority

Private housing rents in Queenstown were also the highest. Rental costs for a 1 bedroom 1 bathroom unit matches the prices you get for a HDB unit, but the latter offers much more space.

Assuming you rent a unit when you turn 27 until you are 35 and you pay $2,000 monthly, your total cost will come up to $192,000.

Cost of buying

As a single person has to be at least 35 years old to buy a flat, we will only discuss how much it costs to buy a private property.

September 2021 private condominium prices rose by nearly 9% from the previous year. Again, prices depend on the property’s location and surrounding amenities, and whether it is leasehold or freehold.

Here are the estimated prices of a one bedroom, one bathroom unit in selected 99-year leasehold condominiums:

TownSample Price Per Square MetreSample Price for 1 Bedroom 1 Bath
Q Bay Residences (Tampines)$14,157.81$680,000
The Tennery (Bukit Panjang)$12,798.03$730,000
Commonwealth Towers (Queenstown)$21,129.89$950,000
Parc Centros (Punggol)$16,590.90$730,000

Source: PropertyGuru

The price of Commonwealth Towers shows that location is king. It costs at least $200,000 more than the other condominiums.

However, buyers who are comfortable with locations further from the city or homes with shorter leases can find a similar unit going for as low as $515,000.

Do You Have Enough Cash on Hand?

If you plan to buy a property, you need to make a 25% down payment, with at least 5% in cash. The rest can be paid through cash or your money from your CPF Ordinary account.

Remember to factor in the buyer’s stamp duty and legal fees. These can be paid for through cash or your CPF money.

Assuming you borrow for the remaining 75% through a loan, you will have to pay that loan off within 35 years. Also, take note of interest rates on your home loan — rates currently range from 1.05% to 1.98%.

Let’s say your new home costs $700,000, and you buy it when you turn 27. This is how much you have to fork out by the time you are 35:

Costs of private property purchaseAmountOption to use CPF?
Down payment$175,000Yes, to an extent. $35,000 (5%) to be paid in cash.
Buyer’s stamp duty$15,600Yes
Legal fees$2,300Yes
8 years’ payments (at an interest rate of 1.05%)$121,260Yes
Total$314,160

During the 8 years before you turn 35, you probably have to pay around 60% more than what you pay if you rented. But a large sum of your purchase can be paid using your CPF money, while rents have to be paid in cash.

Planner Bee’s mortgage calculator can help you figure out your exact expenditure.

Recouping Your Purchase

Assuming an average yearly growth rate of 4% in housing prices, a $700,000 99-year leasehold property could be worth $950,000 in eight years. But since the lease has shortened, it will likely sell for $800,000 to $850,000.

Selling the property at $800,000 when you turn 35 will earn you $485,540. But keep in mind that what you paid through your CPF money needs to be returned with additional 2.5% interest.

Renting vs Buying

Buying a property generally costs more than renting. But you get to foot most of it through your CPF money, which can help to cover your loan installments.

Purchasing a home also allows you to invest a significant amount into an asset. The initial cost can be recouped when you sell the home, while you pocket the remaining profit.

Renting costs less but you do not get to invest in the property you stay in. However, the rest of your money could be used for other investments.

Whether you rent or buy before 35 depends on how much money you currently have and your long-term goals. Are you simply seeking some time away from your family, or are you also interested in investing in an asset that has seen its price rise constantly? Planner Bee can help you make the best choice. Reach out to us at ask@plannerbee.co if you need more advice.

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