Saturday, November 12, 2011

It makes more sense to rent HDB instead of Condominium

I see many foreigners from Europe, USA and Australia coming to Singapore to work as an executive in various sectors and just jumping straight into renting a condominium flat as if they cannot rent a public housing flat (called HDB locally after the state body building them). If it would be OK for them financially of course private housing flats or condominiums are fine to rent but I also see many actually either stretching their budget too much or shrinking into shoe boxes just to stay in a condominium.

HDB flats, or public housing flats, are built by government and sold to Singaporeans for housing. But when an HDB flat passes 5 years of occupancy period, the owner can sell it or rent it with an approval from HDB. Surprisingly many new comers even do not know that they can rent an HDB flat with their work visa such as Employment Pass or Work Pass. And since the friendly property agent they find in Singapore would like to milk the new “ang mo” as much as possible, he/she will do his best to guide them to condominiums instead of HDB. In fact, you can rent an approved HDB flat from its owner with a valid working pass like Employment Pass. Doing so has many advantages over condominium flats. A large, 6-7 years old HDB flat in a very central location and good condition can be rented for 2,500 SGD per month while that money will not even rent you a mickey mouse condominium box smaller than a hotel room and in the middle of no where.

First, you can enjoy a healthier rent to income ratio. I have a friend who pays 3,500 SGD per month to a condo with a family gross income of 8,500 SGD. He can live with the rent but experts agree that if you are paying more than 25 – 30 % of your gross income to rent, you are paying too much for it and this is bleeding out blood from your personal financial health. Actually, 25 per cent is a better upper limit since 30 is usual mortgage limit and unlike rent, that money goes into your equity. So by nearly 40% of rent to income ratio my friend is financially bleeding out. Since a condominium flat rental starts from 3,500 SGD per month, if you are not earning gross 9,000 SGD+ per month, you should avoid renting condominium units. Note: I know, there are many who have no choice but to overstretch their rent budget since rentals are very high even for HDB flats. I write this for people who rent condo while they actually have alternatives like HDB. This is not financially healthy.

Second, you get more value for your money. Many expats rent condominium units a little larger than hotel rooms, called shoe-box apartments here, and still paying 3,000 SGD+ per month while they can easily rent a fully furnished, very modern, 3 - 4 bedroom HDB flat for than amount. And also I see many renting private units very far away from an MRT station to just keep rental budget lower, while they can rent a very good HDB flat just next to an MRT station with less than what they pay. 

These new HDB blocks near Bedok MRT Station are examples of new generation
HDB buildings which provide more privacy and condo like finishing.
Third, you will be near best eateries, cheapest super markets when you rent an HDB flat. Best food in Singapore can be found in these hawker centers and coffee shops in relatively mature public housing estates while the cheapest supermarkets like Shop-n-Save and Sheng Shiong are usually near HDB estates.
Many new comers unfortunately are just directed to private condominium flats as if they are the only alternatives for them. I know it because I have been through that process. 

Unfortunately, some property agents make you believe that as a new comer it is not suitable for you to rent an HDB especially if you earn a high salary. But believe me, Singaporeans, especially the majority living in HDB flats, are very friendly people and Singapore is a very safe place. It is fine if you earn more than 10,000 SGD per month combined salary, else there is absolutely no need to overstretch your budget, pack your family in a very small private unit or live far away from public transportation.  You better rent an HDB and save the difference or spend it for your entertainment in Singapore and South East Asia.

No comments:

Post a Comment