To Rent or Own? Addressing Singapore’s soaring rental rates! | NOTG by PropertyLimBrothers | Melvin
Summary
TLDRThis video script discusses the skyrocketing rental rates and their causes, particularly the impact of the COVID-19 pandemic and work-from-home trends. It explores the rental market in Singapore, comparing rental costs to property ownership and analyzing the benefits and drawbacks of both. The script provides insights into the rental situation's causes, the break-even point for renting versus buying, and the potential future of the rental market, offering valuable considerations for tenants and potential homeowners.
Takeaways
- 📈 Rental rates have significantly increased, with some HDB apartments in Pongo going up to $4,000 per month and condos like Park Esplanade reaching $7,000 for three-bedroom units.
- 🚀 The rental market has seen a 'Quantum Leap' since 2020, with the pandemic and work-from-home trends leading to increased demand for larger living spaces.
- 🏠 Home renovations surged during the pandemic as people were spending more time at home, contributing to the desire for more space and potentially leading to an upgrade in housing size.
- 🔄 Behavioral changes due to the pandemic included an uptick in people moving out of shared living situations, seeking more personal space, which increased demand for smaller apartments.
- 📊 A delay in BTO and new condo property completions has prolonged rental periods for families, contributing to increased rental demand.
- 🏢 The shift to remote work has influenced companies to reconsider office space needs and employee welfare, impacting the residential rental market.
- 💰 Landlords are benefiting from high rental rates, but they also face increased mortgage interest rates over the past year.
- 🔮 The speaker predicts that rental rates should stabilize over the next 12 to 24 months, influenced by the completion of new properties and a rebalancing of supply and demand.
- 🌐 Singapore's high homeownership rate, coupled with a land-scarce environment, suggests that owning property is more advantageous than renting for long-term residents.
- 🏦 Government policies in Singapore, such as CPF grants for first-time homebuyers, encourage homeownership and contribute to the high ownership rate.
- 📉 The comparison between renting and buying shows that the costs of renting for an extended period can accumulate to the point where purchasing a property becomes a more financially viable option.
Q & A
What is the current trend in rental rates mentioned in the script?
-The script mentions that rental rates have significantly increased, with some areas experiencing a quantum leap in rental increments since 2020, and expectations of around 5% growth.
What factors have contributed to the high rental increases discussed in the script?
-Factors contributing to high rental increases include the impact of the COVID-19 pandemic, work-from-home trends, behavior changes leading to more space within homes, and delays in BTO and new launch condo properties.
What is the rental rate for a 4-room HDB apartment in Pongo as per the script?
-The rental rate for a 4-room HDB apartment in Pongo is transacted at about 3,008 to about four thousand dollars per month, according to the HDB website and other sources.
How has the pandemic influenced the rental market according to the script?
-The pandemic has led to a significant increase in rental rates due to the circuit breaker measures, work-from-home trends, and the desire for more space within homes, which increased the demand for larger apartments.
What is the expected impact of the 38 projects hitting the market in 2023 on rental rates?
-The script suggests that the completion of these projects may help balance the rental market by increasing the supply, potentially leading to a more stable rental situation.
What is the estimated number of BTO properties completed yearly, and how does it affect the rental market?
-The script provides a chart indicating a drop in the number of BTO properties completed during the 2020 period, which signifies that many people had to continue renting, contributing to the rental demand.
What are the intangible benefits of renting a property as mentioned in the script?
-The intangible benefits of renting include flexibility to move every one to two years, not being tied down to one property, and not having to worry about renovation costs or property taxes.
What are the tangible benefits of owning a property compared to renting, according to the script?
-The tangible benefits of owning a property include building equity through mortgage payments, having security and longevity in the property, and potentially generating passive income through renting it out.
How does the script compare the cost of renting versus buying a property over a 38.5-year period?
-The script illustrates that paying off a property over 30 years at a 4% interest rate is equivalent to 38.5 years of rental payments at the current market rate, suggesting it might be more cost-effective to buy in the long term.
What is the 'sweet spot' in terms of rental duration before considering buying a property as per the script?
-The script suggests that after renting for 6.25 years, which is equivalent to the down payment for a property, it might be more beneficial to buy rather than continue renting.
What advice does the script give regarding timing the market for primary residence versus investment properties?
-The script advises against timing the market for primary residences due to the high opportunity cost, but suggests that analysis and timing could be applied to investment properties.
Outlines
📈 Surge in Rental Rates and Housing Market Analysis
The speaker discusses the alarming increase in rental rates, predicting a moderate growth of around five percent. They highlight the significant year-to-year rental increment since 2020 and provide specific examples of rental costs for different types of apartments in Pongo and Park Esta. The speaker also mentions the positive implications for landlords but acknowledges the challenges faced by renters due to increased mortgage interest rates. The video aims to explore the rental market, the break-even point between renting and buying, and the impact of the pandemic on rental trends.
🏢 Rental Rate Hikes and Market Dynamics in 2022
This paragraph delves into the drastic increase in rental rates that began in 2022, using the example of a condo project at Cosmopolitan to illustrate the 47% increase over a few months. It discusses the broader impact on various types of properties, including HDB apartments, condos, and landed properties. The speaker attributes the rental surge to several factors: the movement of single professionals seeking personal space, delays in BTO and new condo construction, and the extension of rental periods due to construction delays. The paragraph concludes with a forecast for rental stabilization by 2024, contingent on the completion of BTO and condo properties.
🏘️ Home Ownership vs. Renting in Singapore's Context
The speaker compares home ownership and renting in the context of Singapore's demographics, land scarcity, and high homeownership rate. They emphasize the benefits of owning property due to Singapore's small size, high ownership rate, and government policies that support home buying. The paragraph also touches on the potential for property appreciation and the psychological benefits of owning a home. The speaker suggests that owning is more advantageous than renting in Singapore, given the country's unique conditions and the government's support for homebuyers.
🌐 Global Perspectives on Renting and Ownership
This paragraph explores the cultural and practical reasons behind renting in countries like Japan and the United States, where mobility for work is common. It contrasts this with Singapore's situation, where a stable home environment is preferred due to the country's small size and the cultural emphasis on home ownership. The speaker also discusses the implications of Singapore's high population growth and the potential for becoming a landlord as a better financial decision than being a tenant, given the expected increase in demand for housing.
💰 Financial Breakdown of Renting vs. Buying a Home
The speaker provides a detailed financial comparison between renting and buying a home, using a hypothetical 1.8 million dollar property as an example. They calculate the total cost of ownership, including the mortgage and interest payments over 30 years, and compare it to the equivalent cost of renting for the same period. The paragraph highlights the value gap between renting for 38.5 years versus buying and owning the property, emphasizing the long-term financial benefits of homeownership, such as building equity and potential rental income from a second property.
🏢 The Decision to Rent or Buy: A Comprehensive Evaluation
In the final paragraph, the speaker summarizes the key points discussed in the video, including the Singapore demographics, the pros and cons of renting and buying, and the tangible benefits of homeownership. They stress the importance of considering the opportunity cost of renting versus buying, especially for primary residences, and advise against timing the market for primary home purchases. The speaker concludes by encouraging viewers to make informed decisions based on the information provided in the video.
Mindmap
Keywords
💡Rental Rates
💡HDB Apartment
💡Rental Increment
💡COVID-19 Circuit Breaker
💡Work from Home
💡Behavioral Change
💡BTO Properties
💡Rental Supply
💡Home Ownership
💡Interest Rate
💡Opportunity Cost
Highlights
Rental rates have increased significantly, with some areas experiencing a quantum leap since 2020.
Moderate to high rental growth is expected, potentially around five percent.
The rental market has seen a surge, with rates for a four-room HDB apartment in Pongo ranging from $3,008 to $4,000 per month.
High-end properties like Park Esplanade can cost over $5,000 for a two-bedroom unit and up to $7,000 for a three-bedroom.
Landlords face challenges with increasing mortgage interest rates despite rental income.
The pandemic and work-from-home trend have influenced the rental market, with people seeking more space.
There was an uptick in home renovations during the pandemic as people spent more time at home.
Behavioral changes led to an increase in people upgrading to bigger homes or moving out to have their own space.
Delays in BTO and new condo property constructions have prolonged rental durations for some families.
The speaker forecasts a stabilization in rental rates over the next 12 to 24 months due to new property completions.
Singapore's high homeownership rate and government policies support owning rather than renting.
The value gap between renting and buying is highlighted, with buying potentially being more cost-effective in the long term.
Renting offers flexibility but lacks the security and control of owning a property.
Owning a property allows for potential passive income through renting it out.
The tangible benefits of owning include building equity and having a physical asset.
Renting can be more cost-effective in the short term, but owning may be more beneficial over a 50-year horizon.
The opportunity cost of renting versus buying is discussed, emphasizing the risks of timing the market for a primary residence.
A detailed analysis comparing the costs of renting for 38.5 years versus buying a property is presented.
The episode concludes with advice on considering the long-term implications of renting versus buying in Singapore's market.
Transcripts
rental rates has shot through the roof
honestly it's very scary
do expect rain growth through moderate
to perhaps around five percent this time
around for episode number five we're
gonna talk about the rental rate it can
go upwards around like five thousand wow
where else are we seeing such high
rental increases
[Music]
one of the most horrific things that uh
has happened over the past 24 months was
that in terms of the amount of Quantum
Leap of rental increment ever since 2020
until today the amount of percentage
will calculate on the year-to-year basis
is actually pretty significant and if
you look at the current rates right now
for a hdb apartment in Pongo for example
a four room hdb follow me in a sense
that if we talk about 4A model is about
92 square meters with three bedrooms and
a whole kitchen and of course a home
shelter the rental right now transacted
if you refer to hdb website as well as
some other sources is ongoing at about
3008 to about four thousand dollars per
month and if you don't look at uh for
example the RCR region just have a look
at this newly top property at Park esta
a two-bedroom right there will easily
cost you about 5 000 odd dollars per
month and the three beta will easily
cost about six thousand to some of the
land starting seven thousand dollars of
course this are great news for landlords
and of course landlords are battling
with the increment in terms of the
mortgage interest rates over the past
year however I think if um you are
renting an apartment this is definitely
a disadvantage for you in this sense so
we're going to talk about rental today
and what is the break-even point if
let's say you are currently renting
you're waiting on the market and you're
not buying a property we have done some
calculations from our research team and
this is something that I want to talk
about on the second part of today's
video first part I want to head back to
us 2020 and try to route back on the
monsters on why rental has sought over
the past three years basically the
entire rental situation could have
sprouted from one key source which was
covered now ever since covet circuit
breaker was announced and that started
on the whole entire pandemic issue
around the entire world what has
happened was that over this past three
years I think all of us experienced a
lot of change firstly
we went through circuit breaker so about
two and a half months we were at home
the next thing was that the new trending
started coming out which is the work
from home kind of trending and I think
over the past six months a lot of
businesses and companies are having
issues uh with a mindset shift in the
sense that they definitely want to take
out the welfare of our employees but at
the same time they're also having issues
about having the mindset shift of their
their teammates coming back to the
office for physical meetings and
physical presence and of course I think
in terms of productivity there's a whole
new topic altogether but I think over
the entire past three years what has
happened was that covet circuit breaker
pandemic work from home and that was a
behavior change not just in families
wanting more space within their own
apartments and uh during 2020 or 2021
there was an uptick in terms of the
number of renovation that people have
done within their own home because
everybody was trapped by home they're
trying their own country they're not
allowed to travel so I think a lot of a
lot of savings were reinvested into
their own homes to renovate that place
to make it a better home to live in
because you're going to spend more time
at home during the pandemic season and
that also sprouted out a lot of
upgrading movement with people buying
bigger homes having one more bedrooms if
you have seen some of our episodes we
talked about fact that a lot of our
clients actually contacted us and we've
helped them did successful shifts to
sell their current property in the same
condominium and upgrade to a bigger one
for example like a three beta to a four
beta or two bitter to three beta within
the same development so this was some of
the behavioral change that everybody and
you and me has experienced over the past
couple of years and one thing that we
noticed was also the uptick in the
amount of people moving out of their
home so there was also a season I think
that was in 2021 that a lot of single
professionals were actually moving out
of their homes that they were occupying
together with their parents and their
siblings and because everybody was
working from home you get to rub
shoulders every single day and I think
thing that also gave rise to a lot of
um new Newfound needs that you want your
own space and you want like your own
private space you want a bigger space
for you to to work from home exercise
from home and then you want to rest well
as well and thus um I think there was a
season whereby the one betas and the two
betas and studio apartments were
actually taken up very rapidly I believe
that was the key onset of the entire
rental situation because we only started
to feel that rental rate started to
increase drastically in the year 2022.
so take a look at an example in our
previous webinar that we talk about the
rental is in this particular condo
project at Cosmopolitan so the amount of
increment that has went up was like 47
over a period of a couple of months and
uh four beta back then was about seven
thousand dollars and then at the point
of rental it was already about 11 to 12K
now it's about 14 000 for four beta
right there in River Valley and if we
were to look at a cross-bought hdb
Apartments condo apartments and land the
properties they have all sought in terms
of rental prices and contributing to
this was not just the movement of single
professionals running their own space it
was also because of the delay in BTO
properties as well as new launch condo
properties because the construction
phase of BTO properties as well as brand
new condo projects that was sold during
the show flat season was technically
delayed and when these properties are
being delayed the families that have
already solved their homes their resale
homes and then they are renting in the
market they have to prolong their rental
so for example somebody that have sold
their condominium and they have bought
into a new launch they might have just
signed a one-year lease or maybe a
two-year lease because maybe they bought
into a balanced inventory unit but the
top date was supposed to be at this
particular date but it was further
delayed by another one and a half years
for example that means that they have to
extend their rental for one and a half
to two years because even after you take
possession of your new home keys you
still have to spend time for defects
check you still have to spend time for
renovation and then you need to add a
couple of months to complete that
process and uh because of that a lot of
existing families have extended their
their rental and thus that then created
a lot more demand in the market the
third one was also coupled with families
that went out to rent for a short period
of time for example six months because
they want to do their renovation for
their existing home on video went out to
rent for one year because they don't
want to do a and a for their existing
landed home or maybe uh they want to go
through like a full-on Renault vision
for their landed property that takes a
longer period of time so all this has
then created like a newfound demand and
uh what is potentially going to happen
this year to year 2026 is that if you
look at our latest webinar so there's
there's going to be plus minus about 38
projects that will hit the top date this
year in the year 2023. what might
potentially happen is that uh the
investors has bought into this 38
projects if they're bought into one to
two betas they will most likely want to
rent them out now if
um their buyers they're bought into
let's say the two-bit three-bit or four
betas they might move into state but
when they move it and stay they will
then complete their existing lease and
task that would then free up a little
bit more Supply in the existing rental
market and when they move in all these
properties will then become fresh Supply
in the Market at the same time this 38
projects that will hit the top basically
if it's one to two betas uh being rental
on the market that should also satisfy a
little bit more demand in the rental
market so if these two confidence
balancing out my forecast is that the
rental situation towards 3 and 24 should
taper off to a more stable level and
what this means is that if your
attendant do not lose hope because uh
rental rates will start to taper off in
the next 12 to 24 months uh very lightly
but of course that is also contingent on
whether is there any video properties
that will be completed not just on on
the condos top portion but also on the
BTO properties part so let's just have a
look at this chart here
so this is the estimated number of btos
completed by year-to-year basis as you
can see during the 2020 period that was
actually a drop in the blue bar and uh
this drop in the blue bar basically
signifies the part during the pandemic
season and um this was the estimated
number of units versus the actual number
of BTU that was being completed of
course this this drop actually signifies
that a lot of people would then not get
their keys and they have to continue to
stay with their parents for a longer
period of time or maybe they are already
renting outside and that gave us of
course to some of the rental demand of
course we do not have the full numbers
but that is basically the entire field
on the ground and uh if we were to now
move on to the second segment of course
this is an ho question is that should I
rent versus buying and I think in order
to answer that question there's a lot of
debate on this two portions of course
there are a lot of intangible kind of
comparison and pros and cons there's
also a lot of tangible reasons in terms
of renting versus buying and I think to
add to these two components whether it's
the intangible reasons or tangible
reasons there's also a third component
is to see which country are you in so
for example if you look at Japan and
when you look at United States you
realize that there is actually a large
proportion of
um the residents within that these two
countries that they actually ran within
their own country because the country is
huge they move around different states
for work and um let's just take for
example Japan the largest pool of
tenants are actually Japanese themselves
because they come from other parts of
Japan to maybe World in Tokyo and then
thus they have to rent in Tokyo and
because they are young working
professionals they might not have the
capability to buy a property and they
are also not sure whether they will stay
in in central Tokyo for a long time
because of their work and traveling
reasons so with that when we look at
Singapore Singapore is already a very
small country in fact a lot of people
call us a city T and with that when you
compare that to our existing ownership
rate so we have one of the highest home
ownership rate in the world we have over
90 percent of whole industry in the
sense that when you look at the entire
available stock based on properties
types the entire residential market then
you will get to understand why actually
it's important to own if you happen to
stay in Singapore for a long duration if
you are permanent resident if you're a
foreigner or if you're a Singaporean you
need to understand that because of this
demographics this service our land size
as well as residential inventory and the
way on how our Market moves is actually
more beneficial to own than to rent so
if you don't look at the entire pool of
properties that's available and uh we
have about 1.2 million hdb apartments
with about 340 000 condo apartments and
ECS which are technically exactly
Condominiums and then we only have 73
000 landed properties and ninety percent
of the residents here own properties and
it is also our government policy to
support singaporeans to own properties
because if you look at the amount of
first-timer Grant which our government
has just introduced through budget 2023
they have further raised the amount of
Grant support for first-time home buyers
in order to encourage people to build
families and they have also even
increased amount of grants for
first-time singles as well so the
government's direction is that through
cpf grants with the fact that every
working adult in Singapore if you're a
Singaporean or PR you get cpf
contribution from yourself a part of a
salary of 20 plus your employer have to
top up additional amount into your cpf
account in order to help you take care
of your ordinary account for housing
special account for retirement medicine
account for your health care needs so
the direction is that this is to Aid you
towards having that first set of down
payment to own your hdb apartment so the
direction that actually to own your
property and with that if you are in
Singapore and if 90 of the residents
here own their homes that technically is
not advantageous to become a tenant
situation and the third thing is because
of the fact that when we look at how
property prices have moved over the past
year so firstly rental and the price of
the property are core related when
property prices move up because of the
fact that the mortgage monthly mortgage
that the the landlord if they buy the
property for investment also increases
they will have a graduous uh increment
in expectation for the rental that they
want to fetch and of course the LA the
last thing is also if you were to look
at a white paper we're going to hit 7
million population within the next seven
years right now we are technically close
to about 6 million we have about a
million more to go and first after 20 30
there might be new white papers that
will grow up to eight nine or ten
million in terms of population and with
that with our scars landscape and
everybody in in Singapore having a home
ownership mindset it means that it might
be better to be a landlord than to be a
tenant the key thing to take away is
that in terms of demographics in
Singapore is a little bit different
because singaporeans grow up the mindset
of home ownership from a very very young
age and then couple of the fact that we
are in a land-scares country and the
third thing is that the setup of our
residential choices here is being
largely dominated by hdb apartments and
hdb apartments are largely being stayed
on by the homeowner itself it's not an
investment property people own hdb
apartments for their own stay as their
own home shelter to build their family
and landed properties are also largely
owned State as well and it's a very
small quantity it only represents about
five percent of the overall stock of
Residential Properties and that leaves
the condo Apartments having that 340 000
quantity in the market largely
circulating for own State as well as
rental and times if you don't look at
that in terms of the Rental Supply
sometimes a little bit more limit better
in the sense that you will largely be
catered towards that 340 000 pool but
not forgetting that oh this 340 000
there's a port there's a large portion
of it that is being owned by families
that are living in them and that's the
last piece of the picture is to look at
the population growth chart as well and
for the fact that Singapore now is
having that safe haven status and that
concludes the point that actually in
Singapore just by all these factors
itself as a big rock it might be better
to own a property than to be a tenant
and let's move on to of course the
intangible plus tangible
um pros and cons of course intangible
has been ho kind of debate people who
love to rent of course they were they
were the main the big Pros is that you
are not being tied down to just one
property you can of course switch around
once every one to two years you can
enjoy different types of properties in
different locations you have that
flexibility and of course when Market
situation is down you gotta enjoy low
rental market situation is up the
downside is that you have to pay higher
rental rates the good thing is as well
is that you don't have spend renovation
costs because as a tenant you cannot
renovate the place and thus you will not
even invest in renovating the place for
your landlord you will basically I mean
most tenants they are very experienced
they'll dress up the place themselves
with nice Furnitures and accessories and
carpets and paintings and stuff and
making a home very beautiful I've seen a
lot of homes that are being talented
actually looks better than homes that
are being owned and of course one more
thing is that you don't have to pay
money maintenance fee no property tax
you don't have to pay mortgage insurance
you don't have to pay the bank interest
you just need to take care of the
monthly rental to your landlord as long
as you pay the rent on time you can stay
in the home in a very secure fashion and
of course the downside is that there are
changes to your landlord's interest for
example when they want to sell their
property sometimes the downside is that
you get Disturbed as a tenant because
the landlord will need their agents and
Brokers to bring buyers to view the
place during the weekends and most of
the various takes place during the
weekends because buyers are usually free
on the weekends as most will work on the
weekdays so so weekends is your rest
time as a tenant but then you have to
cater time for home viewings and tasks
that might disrupt your schedule and
your own rest time and of course
um the downside of being a tenant of
course is that you cannot have the
luxury to design and renovate and hack
down walls and thus there might be a
certain layout that you want to do there
might be a bookshelf that you want to
create for your your kids but you can't
do that you can't renovate the place and
you are also at the mercy of rental
increment if you are kids and yourself
fall in love with the property and you
want to renew for another two years and
if the landlord was to increase the
rental then of course the negotiation
has to take place once every one or two
years which can be a hassle and then of
course if you look at the other side of
the tangible benefits of pros and cons
of rental versus purchase is that the
moment you purchase a property
technically speaking the monthly
mortgage that you pay is not gone to
waste because there's always this
principle plus interest portion
principle is your savings into the asset
and take note that real estate is an
asset class that allows you to own the
physical asset you own the title to that
property if you buy a strata title
property you own the title to the strata
space to the apartment it belongs to you
if you buy a lender property the land
title belongs to you the building
sitting on the land belongs to you as
well and of course when you own the
property the upside is that you don't
have to be at the mercy of a landlord
you have longevity you have security and
sometimes ownership creates a secure
feeling for your family especially if
you have children and you just don't
want to have that feeling that every two
years you have this numbing feeling that
you know I might need to move because my
landlord might want to take back the
place my landlord might want to move in
my landlord might want to sell the place
or my landlord might even want to raise
my rent and thus there's a lot of
intangible benefits to owning as well
and of course the next thing is that on
top of that ownership feeling and on top
of having that principal plus interest
portion you can also you utilize that
property to be a sub investment property
in the sense that if let's say you have
the ability to own a second property you
can move up to your new property you can
rent out this place and let your tenant
contribute towards the p and I portion
every month so your tenant technically
will pay for the interest the balance
will go into your principal if there are
excess if let's say rental exceeds your
mortgage that becomes a passive income
to pay off some of the monthly mcsd fee
and if you still have passive income
then that technically becomes a positive
cash flow property that contributes to
these four components the interest to
the bank the principal as your Equity
savings the mcst fees to maintain the
property and of course last but not
least your passive income in terms of
excess cash that you can utilize for any
other things of course for ownership you
have to pay property tax you have to of
course maintain your property and of
course as the owner in exchange for
ownership these are definitely the
things that every homeowner will need to
do but we'll leave that to you to weigh
the tangible level and an intangible
portion but most importantly is that if
you were to look at this data point that
we have
uh we actually wrought up an assumption
and we're just taking an assumption of
this particular property for example a
three beta at 1.8 million now and we put
in this this few parameters in the sense
that if you were to be a buyer and you
put in a 25 down payment you take a loan
of four percent for the next 30 Years
and assuming that interest rate stays
the same at four percent
how is this going to compare being
owning it and renting it and um based on
our prb research team
basically by assuming this parameters
what we realize is that there is a value
Gap in
buying versus renting so what is this
value Gap technically speaking what
happens over here is this is that paying
off this 1.8 million dollar property is
equivalent to 38.5 years of rental so
assuming that the purchase price is 1.8
million dollars this being broken down
into 25 big down payment 1.35 being the
amount that you loan from the bank and
because you're low for a bank for 30
years you need to pay the bank a four
percent interest of this 30 years which
amounts to 970 000 so all in this entire
amount which is 1.8 million dollars of a
purchase price plus the bank interest is
in totality worth worth 38.5 years of
rent assuming that the rental rate is at
six thousand dollars a month so if
you're to pay 1.8 million dollars at
four percent interest rate for the next
30 Years assuming that interest stays
the same what's going to happen is that
your monthly mortgage is going to be
6445 per month however that's being
segregated in the two portion one is the
principal payment which is at about
1945 a month and the other part which is
4005 is actually payment of interest to
the bank so you will start to notice as
well that in the high interest rate
environment you actually pay more
interest in the low interest rate
environment if I were to swap this
into a two percent and um what is going
to happen is that your monthly mortgage
instantly dropped to 4989 per month with
2007 into your principal and 2250 into
your interest so that's the core reason
why also a lot of people prefer to buy a
property in a low interest rate
environment however in Singapore we
technically pay interest from between
one to about four over percent and um
you can take the average about two and a
half percent because even if you don't
buy property this year at let's say four
percent interest rate is not going to be
forever because next year for example if
fat would reduce interest rate you will
then be able to refinance your your loan
if provided you don't take a lock-in
period loan right now and you can
refinance it at three and a half percent
following by three percent two and a
half percent and things like that so on
and so forth so it's not going to be a
Perpetual kind of thing but what I'm
trying to illustrate is that if you were
to buy a 1.8 million dollars property
now your money mortgage is six thousand
four if the rent is same apartment in
this particular condominium is going to
be about 6 thousand dollars so when we
take that and then we we permit into
basically our data engine
what we realized is this few things if
you were to pay rent for 38.5 years
is going to complete
um the full payment of this home which
means that technically speaking if you
continue to rent for 38.5 years you
might as well just buy this home because
if you own this property you can still
continue to live in it until the 99
years lease runs down and uh assuming
let's say you have lived in this
property for 38.5 you can still continue
to to stay for another 10 15 20 30 years
until you you pass on right but if you
were to rent for 38 by five years what
this means is that for the next 16.5
years you are going to continue to pay
ongoing rental assuming that your age
and in this particular scenario is that
if we calculate a horizon of about 50
years and um if and this is based on
Horizon of 50 years so for example if
you started to rent at 30 years old and
you live under age 80. what's going to
happen is that if you are a tenant for
30 over Years you'll still have to
continue to rent all the way and take
note that if you want to purchase a
property the bank will take note of your
age until age 65 to issue you out a loan
for your loan Channel period and we also
back calculated in the sense that
for 75 months of rental about 6.25 years
of rental
you already have accumulated the same
amount for the down payment of a 1.8
million dollars home so that means that
if you have rented more than six years
you might as well just buy a property
because that six years of rental is
equivalent to the 25 down payment of
this 1.8 million dollars property so you
need to take note of this sweet spot
because if you were to continue to rent
one year two year and then you renew for
another two is four years take note that
the moment you hit six years you have
already paid enough rental to pay a down
payment of a home and you might as well
take a loan because speaking of which if
you can afford a six thousand dollars
rental a month that means that you can
also afford a six thousand four hundred
dollars mortgage a month and that means
that in terms of income level and most
of the time the calculation is that your
monthly mortgage or monthly renter
should not exceed about 35 of the total
income that you bring home uh per month
because if more than that is going to be
in a very unhealthy Zone that you have
no other disposable income for your
insurance for your food you're traveling
your clothing your kids education and
your savings and stuff like that so with
that this 6.25 years is a very nice
indication because the moment you are
very near to the six year mark you need
to take note that you should actually be
buying rather than renting and if you
have rented for 13.5 years technically
speaking you have already fulfilled the
entire 30 years of mortgage interest
rate that you're supposed to pay to the
bank which is that 970 000 that we talk
about so if you rent for 13.5 years
you've already paid 900 over a thousand
dollars of rental and you might as well
just buy a property so before you even
start the rental journey of course
there's a lot of argument on that
because for rental you also uh will mean
that maybe at the point of renting you
do not have the level of down payment to
down pay your home but this applies to
families that are trying to time the
market so some families they maybe are
trying to try to Market understand that
they want to sell off their landed or
condominium or the hdb and they only
wait for a downturn or recession in
Singapore hopefully uh to hope for the
price of properties to come now and then
buy but they find themselves renting and
renting and renewing and renewing for
years and then that amount render that
you're paid actually could have been a
down payment for your home that you
should have bought almost immediately in
the back to back transaction because in
Singapore we talk about it a lot of
times it's very risky to time your
Market especially if you're timing your
market and you are trying to time your
primary residence and take note that
primary residence has an opportunity
cost and you have the opportunity cost
that you either own or you have to rent
or you have to stay with your parents or
somebody else so we only suggest that
you should time your Market by doing
analysis looking for opportunities for
your second third fourth property
investment your primary residence you
should not time the market because the
op cost is just technically too high so
for this episode we'll talk about the
third component which is the big road of
the Singapore demographics we'll talk
about the intangible benefits and pros
and cons we'll talk about the tangible
benefits and pros and cons of renting
and buying and we hope that this
particular episode will help you to make
a decision whether you're currently
renting your timing the market or your
home owner as a landlord we go to this
episode on nangasunago will give you
value and I want to see you on the next
one because the next episode is a banter
series that we'll talk about very
interesting topics and we'll see you on
the next notg take care
[Music]
right so this is episode five
let's do it
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