Buy or Rent: Living in Singapore
(4 pages of text)
Case (Gen Exp)
Mr. and Mrs. Wong and their three children had rented a condominium unit in Singapore for the past six years. During that time, they had been watching the property market with the objective of buying a home of their own. A larger unit in the same building finally became available for sale in June 2016. Coincidentally, their rental lease would expire soon after that date. If they decided to buy the larger unit, they would hold it for the next 10 years. Their net gain or loss of the buy versus rent decision would depend on the selling price of the unit at the end of 10 years and the rental payments.
This case can be used in an undergraduate or MBA course in personal financial management or fundamental financial management. It gives students an opportunity to
- perform a quantitative analysis of a buy or rent decision using the opportunity cost of capital, time value of money, discounted cash flows, ordinary annuities, and growing annuities; and
- consider qualitative factors such as the stability of the rental market, the stability of income, alternative investments, and the flexibility provided by renting.
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