High House Rental Rates in Singapore: Should You Rent Now?
Rental rates in Singapore are steadily increasing and it is getting expensive to rent a house in Singapore. This is true for both HDB and Condo as rent prices have been rising for more than 18 months.
According to Business Times, condo prices increased by 21.1% and HDB rent grew by 17.9%. So why is this happening?
Renting In Singapore
To understand the rise in rental prices, we have to look at 2001 when rent control was abolished. Back then, 90% of Singaporeans had ownership of their own house. This meant that very few Singaporeans were renting and the majority of renters were expats or foreigners.
This meant that rent control was counterproductive and was abolished to make the renting market more competitive. However, after 20 years, the situation has changed. The number of expats in Singapore has increased over the years and more Singaporeans are looking for rental properties.
Why Are Rent Prices Increasing?
Inflation
If you have seen the news recently, you would have come across the Federal Reserve rate hikes. As the Federal Reserve increases interest rates to curb inflation, what we observe domestically are home loans increasing and becoming more expensive.
As mortgage rates increase, buying a house may seem like a bad choice at this point in time and prospective buyers may consider renting for the time being till the prices of home loans come down. The demand for rental properties thus increases.
Beyond prospective buyers, landlords are also facing pressure as those who still have mortgage repayments are feeling the stress of high-interest rates and will be trying to get more rental income to cover the interest expense.
Expats
With the pandemic easing and expats returning to Singapore, the demand for rental properties will definitely increase. This is worsened by the large influx of Hong Kongers as they seek to escape the draconian COVID-19 rules set out by their government.
Expats are usually high earners and would usually be looking for more expensive properties. Furthermore, most of them are unable to get public housing due to citizenship requirements, thus, condo and expensive HDB flats are usually their targets.
Moving Out
Younger Singaporean adults are also looking to move out of their parent's place in search of their own private space away from their parents.
After 2 years of the pandemic, many young Singaporeans find themselves needing their own private spaces. Spending 2 years together cooped up under the same roof day-in and day-out can put a strain on their relationship, thus there are a good number of young Singaporeans moving out. These younger individuals will be looking at smaller and affordable HDB flats to rent, so as to meet their budget constraints.
These 3 reasons cover why the rental prices are rising from affordable HDB flats to condominiums.
What Should You Do?
With the rising interest rates making home ownership and rentals unaffordable, it is important to make the right choice for you before sinking your money into something that you will regret.
Whenever we look at such situations, it always boils down to your current situation and goals. Be it to save money, to start a family or to move out of your parent's house, there is always the best option you can take.
If your goal is to save money, the simplest thing you can do is to just stay with your parents. However, what if your goals are different or what if you do not wish to stay with your parents?
Families
If you are getting married or building your own family, the better option may be to just bite the bullet and buy a house. There will be more stability in this option and ways you can make it work.
If you already have a BTO, you could either make the choice of staying with your parents for the time being or rent a small apartment to tide through until your new apartment is built.
If you are looking at a resale flat, you will have to be careful. Understand that should you use a bank mortgage with floating interest rates, the interest rates may climb up more as the bank adjusts to the market situation. In such cases, it is wise to buy a flat that is slightly below your budget so that you have some wiggle room should the mortgage repayment increase in the future.
Once the interest rates return back to normal, you can consider getting a mortgage refinancing to lower your interest rate payment.
Read More: Best Home Mortgage Loan Refinancing 2022
Moving Out For Independence
For the younger adults looking to move out and gain independence from their parents, all hope is not lost. Consider sharing an apartment with close friends to offset the high rental cost. Alternatively, look for room rentals instead to save a bit of money before rental rates come down in the future.
Read More: 5 Ways to Save on Rent in Singapore
Personal Loans To Tide This Difficult Period
If for some reason you are weighed down by rising rental prices and in need of money, consider getting a personal loan to tide over this period of time.
HSBC Personal Loan
- Eligibility
- S$30,000 of annual income
- Max. Loan Amount
- 4x monthly salary for income S$30,000 to S$120,000; 8x monthly salary for income > S$120,000; S$200,000 Maximum Loan Size (2x monthly salary for foreigners)
- Min. Loan Amount
- S$10,000
- Processing Fee
- S$0
- Approval Time
- 1 minute approval, receive cash in one business day
Promotion:
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HSBC's personal loans typically charge the lowest effective interest rates in the market (from 6% EIR). Additionally, HSBC is the only lender that provides 7-year personal loans in Singapore, which can reduce the burden of your monthly repayments by spreading them out over a longer period of time. HSBC also boasts a quick 1 minute in-principle approval time and you can receive cash by the next day for successful loan applications of less than S$100,000. Finally, the bank is a great option for foreigners living in Singapore, as its income requirement for foreigners (S$40,000) is the lowest of any bank in our review.
| Loan Duration | Flat Rate | Processing Fee | EIR | Monthly Instalment | Total Cost |
|---|---|---|---|---|---|
| 1 year | 3.2% | 1% | 6% | S$860.00 | S$420 |
| 2 years | 3.2% | 1% | 6% | S$443.33 | S$740 |
| 3 years | 3.2% | 1% | 6% | S$304.44 | S$1,060 |
| 4 years | 3.2% | 1% | 6% | S$235.00 | S$1,380 |
| 5 years | 3.2% | 1% | 6% | S$193.33 | S$1,700 |
| 6 years | 3.2% | 1% | 6% | S$165.56 | S$2,020 |
| 7 years | 3.2% | 1% | 6% | S$145.71 | S$2,340 |
- Eligibility
- S$30,000 of annual income
- Max. Loan Amount
- 4x monthly salary for income S$30,000 to S$120,000; 8x monthly salary for income > S$120,000; S$200,000 Maximum Loan Size (2x monthly salary for foreigners)
- Min. Loan Amount
- S$10,000
- Processing Fee
- S$0
- Approval Time
- 1 minute approval, receive cash in one business day
Promotion:
|
|---|
HSBC's personal loans typically charge the lowest effective interest rates in the market (from 6% EIR). Additionally, HSBC is the only lender that provides 7-year personal loans in Singapore, which can reduce the burden of your monthly repayments by spreading them out over a longer period of time. HSBC also boasts a quick 1 minute in-principle approval time and you can receive cash the next day for successful loan applications of less than S$100,000. Finally, the bank is a great option for foreigners living in Singapore, as its income requirement for foreigners (S$40,000) is the lowest of any bank in our review.
| Loan Duration | Flat Rate | Processing Fee | EIR | Monthly Instalment | Total Cost |
|---|---|---|---|---|---|
| 1 year | 3.2% | 1% | 6% | S$860.00 | S$420 |
| 2 years | 3.2% | 1% | 6% | S$443.33 | S$740 |
| 3 years | 3.2% | 1% | 6% | S$304.44 | S$1,060 |
| 4 years | 3.2% | 1% | 6% | S$235.00 | S$1,380 |
| 5 years | 3.2% | 1% | 6% | S$193.33 | S$1,700 |
| 6 years | 3.2% | 1% | 6% | S$165.56 | S$2,020 |
| 7 years | 3.2% | 1% | 6% | S$145.71 | S$2,340 |
Conclusion
As the Federal Reserve continues with its rate hikes, home ownership and rental will be the first few victims. As a result, it is up to us to be more financially prudent with our money and make the best decision at this point in time.
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Boon Hun spent over five years in the content marketing space as the managing editor of Goody Feed creating interesting and relevant content for the social media generation. In 2022, he moved to the FinTech space while remaining true to his roots, intending to bring financial literacy to more people in Singapore. When not doing his work, he can be found watching people build homes on YouTube.