Photo: The Straits Times
For first-time property owners, purchasing a home of their own will be one of the biggest investments they make in their lifetime.
But is it better to rent or buy your own property with the current situation of the real estate market?
Mr Benny Koh, 57, a consultant at a wealth management firm that specialises in real estate investments, said: “Your choice to own a property or rent a place to stay should not be dependant on whether the property market is doing well or not. The key thing is to look for the best deal that fulfils what you need.
“If you have an immediate need to stay somewhere, try to avoid having a ‘wait and see’ attitude as that may result in you missing other opportunities. For example, if you are buying a place for your own personal stay, you may find that you have to forego a particularly attractive deal as it may currently be beyond your means to purchase it. Sometimes you just have to look for the next best option and come back to your preferred deal again in the future.”
TO BUY OR RENT?
Don’t buy a property if you are not sure about settling down. Mr Koh said: “Purchasing a property is a huge financial commitment that lasts a long time.” If you intend to buy a home, understand the regulations behind freehold and leasehold properties.
Mr Koh said: “Freehold properties cost more as the ownership of the real estate, including the parcel of land for landed properties, is yours in perpetuity. Leasehold properties, though cheaper, will be repossessed by the government after a certain period, which is usually 99 years.”
Mr Koh highlighted that most leasehold properties depreciate each year, whereas freehold properties appreciate.
He said: “Having said that, there are also many factors that affect the value of leasehold properties and the rate at which they depreciate. “Rather than focusing on the rate of depreciation, pay more attention to trends in the market and other ‘hard’ factors as well, such as location, type of development, as well as the pricing and competitiveness of similar developments in a particular area.”
If you feel that current property prices are not in your favour and you need a place to stay, then renting is still a viable option for the short term.
Mr Koh added: “It all comes down to your priorities in life at any point in time. The downside of renting is that you don’t own a home of your own. You also have to bear any increases in rental fees as the value of the property appreciates.”
THE UPSIDE OF RENTING
Renting requires minimal commitment from you as a tenant. You are usually required to pay an initial deposit to the landlord, which serves as an insurance to him or her to cater for any damages or repairs that may be incurred by you during your stay.
Mr Koh said: “Renting is more affordable financially. You also avoid being caught in any financial difficulties if your income is affected by unforeseen changes in your career. The last thing you want to be bogged down by in the event of a pay cut or medical emergency is to have to pay off a mortgage.
HOUSE BUYING TIPS
Here is a checklist of things to look out for if you plan to buy a new home.
The location of your property has a huge impact on the comforts of your day-to-day living. Find a place that is close to amenities and transport hubs. Having the convenience of shops and food outlets within easy reach will make your daily living more comfortable.
2. Developer’s track record
Choose a property built by a reputable developer. You are less likely to encounter any issues with the property. Reputable developers also have standard sales and purchase agreements that are fairly straightforward, and drafted according to regulatory requirements. This makes it easier for you to follow up with them on any issues or defects that might arise later on with your property.
You will need to get a home loans to finance your property purchase, which gets you into debt. Ensure that you have sufficient cash flow to pay for both the down payment and monthly instalments for your mortgage loans. You do not want to overstretch your finances.
4. Know what you are buying
Do not make your property purchase based on the opinion of others.
Be objective when you are assessing a property. While some opinions may be given with the best of intentions, you still need to make your decision based on your fact checks and due diligence, as you are the owner of the property.
Written by Hector Tan for The Straits Times