Imagine your life was over.
In the timeline of life, how many houses did you live in?
Most of us think of:
If you live outside of Singapore, where houses are cheaper, maybe it’s a:
For the lucky bunch of us who need less variety and pretty much know what they want, the options are simpler:
In these fantasies, the first house you buy is the last house you buy.
Assuming you can confidently live by yourself/yourselves, you know what house you (and your spouse if applicable) want to live in, to age in, raise kids in, retire in and expire in.
If you can’t afford a loan yet, rentals might be a waste of the savings+investments you’re building to afford buying this One Home.
Conclusion: If you crave less variety and have researched enough to have high certainty in the house you want, save up to buy.
Of course, if you have the luxury of being in a multi-generational flat, and are comfortable with it, you may not have to worry about buying at all. This might seem outlandish if you subscribe to the idea of independent living, but 3Gen flats are a thing in Singapore.
I’ve met adults with children who live in the same flat as their parents, who have no intention to move out. It’s not for everyone, and it’s not for me, but I can see how 3Gen flats are a supremely convenient, secure and frugal choice.
To some, staying in the same box for 10-20 years gnaws at the soul. Comfortable routines and neighbours may be valuable to some, but life can look short and the world, your oyster, is ever ripe to be explored.
What tempers variety is children and affordability.
Children of parents who travel a lot don’t recount a great experience (Check out this Reddit and this Quora). While the variety is exciting and one learns to be a super-adaptor, it’s hard to build lasting relationships with friends that you move away from for years and years. People in LDRs have it hard enough.
My advice to those craving a variety of homes who want kids is to go forth and move to a new setting/view/style, but relocate near the same schools and amenities to help your children grow some deeper social roots in a community. Most friendships take years to form, developing the ability to maintain long relationships later in life. See the Reddit and Quora links above for more perspectives about this!
Of course, for readers who don’t seek to have children, its a lot easier to move houses frequently, as long as it makes economic sense to you. Which brings us to…
Looking long term and buying a dream home for your 60-year old self can be tough for your cash!
If you’re looking to buy, say, a landed property for your retirement higher than 1000sqft (approximately a 4-room HDB flat, or 27 king-sized mattresses), most of those will cost you upwards of $800,000 SGD.
Take this scenario:
If you took an $800,000 loan for 35 years at a fixed interest rate of 2.6% (rates are lower now but it’s a good average since we’re considering fluctuations over the next 35 years), ultimately your future mortgage-paying selves would be paying $1,183,692 in total, or 150% more than the initial loan amount.
Renting in 5 increasingly expensive different places over the same 35 years could result in a savings of $108,492. That might look measly in a conversation about real estate prices, but if you put that sum to investments you could be saving more than you think!
Some say that renting means you don’t hold an asset after all those years. But consider this – if you bought that house to live in, the only reason you would sell off your property is to spend that cash on another place to live in.
The situation would be different if you were not living in your property, and in fact paying rent somewhere else while collecting rental income. Idea, but perhaps more on that in a future post!
So buy or rent?
My personal opinion is that if you haven’t tried living in your own place yet, the experience is absolutely worth it (The woke salaryman covered this pretty well). If you are just trying things out first, go for a rental and go low until you learn what you really want. Renting provides the flexibility of GTFO-ing when you’ve had enough of one place.
Otherwise, jumping into a multi-year commitment to pay a monthly mortgage can be stressful if you:
- Are unsure of what house you want for the next 30 years
- Don’t have career stability (mortgage payments are harder to get out of than rents)
- Don’t have enough savings to bolster 6-12 months of expenses on a rainy day!
However, once you’ve figured out what you want, and can afford a loan to get it, and have enough savings to buffer a year of low/no revenue, I think that buying is a legit option.
After a lot of thought, I approach the Buy vs Rent question like a buffet.
At a buffet, I’m looking for the exact assortment of foods to stuff my face with.
Faced with 20 options at the table, I sample a small part of each food on the menu.
Some of the food, sucks. I take note and avoid it the next round.
Some of the food, is not bad, but I want to try it again in round 2 to make sure.
And, of course, there are the must-haves. The smoked salmon. Eclairs. That sweet-sour fried fish that everyone loves. These will stay in my plate for round 2, 3, 4 and probably be part of my last bite.
Get the picture?
Basically I want to figure out what I like and don’t like about a home, before finding a ‘perfect’ home that has most of my bases covered for the next 30 years and beyond.
I can’t speak for what the 70-year old me might want, as tastes change, but I intend to make his decisions easier by properly planning how I spend my money today.