Why do even Locals Residents Rent ?

Given the high ownership figures in Singapore, perhaps one of the highest in the world, one would ask, do locals even rent?

Before going into the topic, let us define what is a local? A local is someone who can be loosely defined as a Singaporean who was probably born and lived here. However, the definition of local changes every day.

Let me offer a few perspectives

Within 1 km of a branded school

Everyone wants to do well in life. However, what is more important then doing well is for your children to do outdo yourself. Well at least that's the belief. One of the ways that parents can give a headstart to their children is by sending them to a good primary school. This is the only time that a parent can give their children an advantage. The rest of the education journey is up to the child.

The return of the local expat

The locals have returned from a long term overseas assignment. They have probably sold their homes a few years ago. What they did not anticipate is for home prices to have risen so much and as such feel that they are priced out of the property market. As they have sold at a much lower price, they cannot phantom to pay for a higher price for the same type of flat at same location.

However as they were on expat terms in a foreign country, their expenses are probably fully paid with additional spare cash and as executives, they probably enjoyed high salaries. Hence, it can be said they are wealthy.

The local executive on expat terms

This executive is probably grew up in Singapore and has a home here. The additional benefit that is executive has is the company is willing to offer rental benefit to the executive, provided the executive rents. The way the executive gets around this is by renting out is own home and staying in a rented home.

Assuming his own home can be rented out for a bare minimum of $3000 (after costs & taxes). Receives rental benefit of $5000. Executive rents a $6000 home. At the end of the day, the executive receives a free cash flow of around $2000.

Of course these are conservative figures, but it is free cash flow.

They sold their existing property to avoid ABSD and renting whilst waiting for their new home

They sell their homes as they want to upgrade. In fact they want to two properties and they can afford it. They only thing they they don't want to do is to pay for ABSD - Additional Buyer's Stamp Duty. For locals wanting to buy the second property property the stamp duty is 12%. This may not mean much. But when you take into account the actual sale price of lets say $1M, the ABSD is $120,000.

Assuming a rent of $4,000 for year, it would only bring it up to $48,000. This translates to a spare cash of $120,000- $48,000 = $72,000. With this type of cash, it can be used for reenovation of the new property or for rental.

They are waiting for the property down cycle

These category of people could be classified as rich and propbably very smart and anayltical. Perhaps over-analysing for their own good. They expect the property market to drop significantly before they jump into it and make another wuick buck. They may have made their pile of cash through that method previously and want to repeat it again. But truth be told, it does not come through.

Hence, they miss the cycle this time round.

They are declared a bankrupt and cannot purchase a home. They owe debt collectors or Ah-Long $$ so they are hiding out.

The above 2 scenarios are self-explanatories as they cannot afford to buy. The last 2 categories will be your least desired type of tenants.