Buying vs renting property - which is better?
Buying vs renting property - which is better? Looking for
property in Singapore? Still deep in thoughts about whether
buying or renting is the better option? Here are some points
that you could consider in your decision-making process.
Hopefully, it will help you will to select the option that is
suitable to your needs.
Do you have sufficient initial capital?
When you make a property purchase, your initial capital outlay
is 10% (out of which 5% can be from your CPF and the remaining
5% is to be in cash). For renting purposes, you would typically
be looking at somewhere between 1 to 3 months rental value for
the security deposit (depending on lease terms and the
landlord's requirements).
Tax and depreciation shelter
Property buyers enjoy tax and depreciation shelter whereas
tenants do not. If a loan was taken up for the purchase, the
interest component (being an expense item) reduces the taxable
income.
Looking at it from an investment point of view
It has been well documented that there is strong correlation
between real estate growth and the country's economy. If the GDP
is expected to rise significantly in the mid to long term, it
would be quite likely that home prices follow suit and this will
give home buyers potential on getting good returns for their
investments whereas tenants do not enjoy any returns on the
rental paid out.
Using real estate as a inflation-hedging tool
Real estate has often been used as a hedge against inflation -
the effects are transferred onto the tenants through rental
increments. Inflation will work against the tenants when the
market rises, landlords will increase rents during lease
renewals and this becomes additional cost to the tenants.