Nowadays, renting home is a better bet

It is one of the great unspoken beliefs in Singapore: that it is far better to buy than to rent a home. This assumption is now being challenged.

With the housing market drowning in a sea of unsold houses and condominiums, an increasing number of buyers has realised they might be better off living in a rental property, at least for the next few years.

Intuitively, Asians want to own the roof over their heads. This desire for home-ownership is the driving force behind the housing market in Singapore, where more than a dozen developers compete for a small slice of the population who want to live in private housing.

Singaporeans also believe that paying rent doesn't make financial sense - why pay rent when you can be making mortgage payments instead?

Latest figures from the Urban Redevelopment Authority (URA), however, are telling buyers to be counter-intuitive. That is, they should hold off their buying even though prices seem to have fallen so much from the peak.

Look around you. Everywhere there are 'For Sale' signs. These are to be found not only in new developments, but increasingly, in completed properties where owners of second and third homes are putting them on the market.

More ominously, they are also to be found in many auctions, put up by banks which have foreclosed homes.

With some 30,000 units, both built and unbuilt, in the hands of developers, and the many thousands coming from individual owners and mortgagee sales, it will take nothing less than a miracle for the market to soak up the excess stock in the next five years.

The question that comes immediately to mind is: What can home- buyers do to take advantage of this glut?

The answer is clear: They should hold off their purchases until prices come down to levels where there is an equilibrium between supply and demand. Meanwhile, they take advantage of the low rents and find themselves a nice temporary home.

It is a sad fact that a sizable portion of homeowners in Singapore is now holding properties whose resale value is below their outstanding mortgage.

This is why many people are gritting their teeth to keep the mortgages going, rather than just selling off their properties and moving to cheaper lodgings: they can't afford to sell because the proceeds are not enough to pay off the borrowing.

But is the alternative better? The longer they wait, the more property prices will fall and the worse their predicament. For these home-owners, the saying that Singaporeans are 'asset rich, cash poor' has now been turned into 'asset poor, cash poor'.

Obviously, an upturn in the property market will change everything. But even if the American economy recovers - some are hoping for a U.S. rebound next year - this may not help Singapore in the short term as the country is going through structural changes due to the rise of China as a trade competitor.

Singapore, like many Asian countries, has been caught napping by the rapid rise of China. The result is a loss of at least 20,000 jobs this year, and more next year, as manufacturers move their operations to China. This, in turn, leads to a drop in demand for private housing, and falling prices, in Singapore.

Sad to say, when the recovery comes, it will probably not be sufficient to help most of those whose property is currently below water. In other words, there're likely to be more fire sales before the housing market finds its equilibrium.

Home-buyers should, therefore, think twice before putting down their money for a new property. Yes, if the property happens to be the one you have dreamt about all your life, go for it. Otherwise, it does pay to wait.

Buy anything now and the chances are you will regret it some time in the future - when a similar property will come to the market at a lower price.

After all, if home buying is the single biggest purchase in the lives of most people, why not wait a year or two for the right one at the right price to come along? (Business Times)