Friday, May 20, 2011

Rent or buy a home?

Is it better to rent or buy a home? Watch this video for an explanation of the factors that you need to consider. Please note that the situation in America is different from Singapore, so you have to do a separate calculation in Singapore to get the economics right. Here are some important differences:

  • Interest rates are different between the two countries
  • There is no deduction for mortgage interest from income tax in Singapore
But, the general conclusion applies. At the high level of prices of properties, it is better to rent rather than to buy a property. People overpay for their property in the hope that the property will continue to appreciate in price, but up to a point, the price is too high and will fall. This is what has happened in America and is likely to happen in Singapore as well.

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