Tired of renting? You’re not alone, saving up for a home to call their own is a dream shared by many, particularly as rental prices remain fairly high in Singapore. Whether it is a studio apartment in a central location or a larger property in a more tranquil neighbourhood, planning for your purchase is an essential first step.
A first home is much more than the bricks, mortar, wood and nails that create it; a first home is a huge milestone, a place to create memories, raise a family, or even earn a rental income. Buying your dream home can be a daunting prospect – especially given the huge financial risks and implications involved – but it is not impossible to keep it within sight.
In fact, our H1 2021 Consumer Sentiment Study has shown that 59% of renters surveyed choose to rent over purchasing a property because they do not yet have enough savings. Given how expensive property in land-scarce Singapore is, careful financial planning and varied tactical approaches could get you closer to your goals.
So, if you’re a renter and feeling held back by financial factors, don’t lose hope! Here are five practical tips for saving up towards your property ambitions:
1. Pick A More Affordable Place to Rent
Why pay so much towards someone else’s mortgage? Although moving to a new house may seem an inconvenience, it is a small and perhaps the most sensible start towards saving more dollars. Some options to think about:
- Choose a smaller apartment – yes, it could possibly be a bit of a squeeze, but this would also be a good opportunity to declutter!
- Live in the suburbs – central and city locations and properties near MRT stations will command higher rentals. Moving just a little further away can notably decrease the rent you pay.
- Choose HDB instead of private property – HDB flats are significantly cheaper to rent than private properties. HDB estates are located all over Singapore with conveniences such as wet markets, hawker centres, and transport connections within close proximity.
- Choose a room instead of an entire apartment – A good option for singles or couples is to consider renting out a room in a shared apartment. Sharing the costs of rental and utility bills would certainly go a long way in saving towards your own home.
While none of these situations may seem ideal, remember they would only be temporary. Pick the alternative that best suits your circumstances and don’t lose focus on your goal to save towards your own property!
2. Negotiate with Your Landlord
If you are struggling financially, don’t discount the possibility of speaking directly to your landlord and explaining your circumstances. Despite the uncertain environment, the good news for renters is that landlords are open to negotiations.
In fact, 93% of landlords surveyed in our latest Consumer Sentiment Study said retaining tenants in the current climate was very important. Further, 72% expressed willingness to provide rebates or discounts to reliable tenants who may have been impacted by the COVID-19 pandemic.
3. Cut Down on Daily Expenses
While rent is likely to be your biggest monthly expense, incidentals can also add up to huge amounts that impact on your savings. Cutting down on recurring expenses, even on something as small as a takeaway coffee which can range from between $2 to $7, will make a difference in a short period of time.
Consider how else you can reduce daily living expenses, such as dining out less often, reducing your shopping budget, and switching to energy-saving appliances.
With the open electricity market in force, there is now greater choice in energy suppliers offering competitive rates. Similarly, shop around for the best deals from telco and network providers without being locked into expensive contracts that may not be necessary for your requirements. Cutting down on recurring costs can translate into significant savings in the long run.
Singapore is also a haven for secondhand goods and furniture – before purchasing new, have a look online on platforms such as Carousell and Facebook Marketplace where great bargains are often discovered.
4. Ensure Your CPF Is in Order
For Singaporeans, the Central Provident Fund (CPF) Housing Scheme is one of the biggest financial resources towards property purchase. The CPF savings can be ‘unlocked’ and utilised for several requirements such as stamp duties and legal fees, housing loan, or a down payment for the property purchase. If you are considering tapping into your CPF resource, it is extremely useful to understand your eligibility and how much of your fund can be used.
CPF is essentially meant for your retirement needs, so tapping into the fund towards a home loan or purchase is a big decision, as the more you take out impacts on your retirement finances for the future. Make sure to plan for this accordingly by growing your CPF savings and ensuring your employer is making timely contributions. You also have the option of topping up the savings voluntarily (if you’ve received a bonus, for example) to take advantage of attractive interest rates and make tax savings.
5. Clear Your Debts
A strong path to accelerating your savings is by clearing your debts. Let’s face it, not everyone has cash in the bank to buy a property outright, but the more debts you have the less you can borrow.
To qualify as a good candidate for a loan, it is very important to demonstrate your capacity to pay it off. In order to obtain a home loan, banks will evaluate your financial situation before determining your Total Debt Servicing Ratio (i.e. the portion of a borrower’s gross monthly income that goes towards mortgage payments).
Maintaining clear or low debt can happen with subtle changes or conscious buying and borrowing decisions – for example, paying off personal loans as soon as possible, delaying applying for a car loan, and making credit card payments on time to avoid late fees.
When working towards your first property purchase, be realistic with your goals while taking all these factors into consideration. Your home will be one of your biggest financial investments and hopefully one that lasts for generations.
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This article was written by Dani Boekel-Charles. Dani is a freelance writer and a keen follower of news and global politics. She loves exploring Singapore by foot, is a grammar nerd, and mother to two children and a sourdough starter called ‘Sherman’.