I’m a huge weirdo, so I love to do random studies like whether I can eat a whole bowl of ramen (I can), whether 7 hours of sleep really makes a huge difference to productivity (it doesn’t), and whether The Wolverine is the worst X-Men movie ever (the jury is still out on that one).
My latest foray is trying to figure out whether home ownership is actually worth it in Singapore. You know the usual argument: Prices remain high despite cooling measures, Singaporeans are taking on too much housing debt, yadda-yadda. So it got me wondering: Let’s try to challenge the assumption that home ownership is The Ultimate Goal of Life for everyone, and think about when it might actually be more worth it to rent.
I’m not a home owner myself, nor have I done any research on this, so I’m looking for some help.
The genesis of this is this article from James Altucher:
But first, what is the true cost of your house:
OWN = down payment + size of mortgage, + all the interest payments, + all the taxes (which can’t be calculated since taxes will go up in unexpected ways) + all maintenance (which also can’t be calculated) + opportunity cost of time (which is minimal because you love Home Depot and toilets).
RENT = All of your rental payments added up MINUS what you would make buying bonds with the money you would’ve used on a downpayment.
Then compare the two. Which one is more? Don’t do the choice that adds up to more.
You can argue that I should also MINUS what one would make from the rising value of a house. But it’s basically unpredictable and people put that money into buying the next house anyway.
Is this argument valid? Flawed? Completely freakin’ unreasonable?
I’d love to crunch the numbers on this thing. I have no idea where to start though.
I’d love to hear from you if you could supply the figures he mentioned:
- Size of mortgage
- Interest payments
- Tax payments (let’s assume it won’t go up)
- Rental for an equivalent property
Alternatively, if you could point me to a resource where I can find figures like these, that’ll be awesome too.
Or even better still, if you’d like to work with me to take a stab at this, send me an email and we can talk.
A caveat: This is a super controversial topic, so I know a couple of people are going to email me with passionate rants about how expensive everything is and/or why renting is the BIGGEST MISTAKE OF YOUR LIFE. Those are really fun to listen to, but let’s keep it objective and reasoned, aight? 🙂
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