Imagine this in Singapore: You can rent a house for most all your life where you and your family will stay because almost everyone else is doing the same.
Well, you can if you live in Germany. In fact, this rental culture is quite commonplace in European countries such as Switzerland and France.
Back to Singapore. How many people will do so? I guessed not many. Why?
The Singapore government has been promoting home ownership since many decades back. Singapore is known in the world for its high home ownership, with 90 percent of residents living in homes they own, according to a 2011 Business Insider report.
Government policy aside, Asian values also contribute to the high ownership in Singapore. Mr. Wee, self-employed, remarked, “I’d rather own a property than rent. Reasons being we are ethnic Chinese and we need to have a home. (Unlike) Westerners, they are very used to renting.”
This same sentiment was echoed by Mr. Ong, who thought about his children inheriting his house in future.
Germany, on the contrary, is known for having more renters than any other European countries. Let us explore the stark contrast in these two countries, and how the ownership/rental mindset evolved since the colonial days and the post-war period.
Rental Control
The Singapore Control of Rent Act was first introduced back in the colonial days, with the aim to protect tenants from dishonest landlords during the post-war periods when there was a shortage of houses. The Act also limits the landlord’s right to increase the rental. The Act was enacted in 1953.
Forty-four years later, on 3 April 1997, the Singapore government announced that the Act will be abolished on 1 April 2001. Now rentals in the private housing sector are left to market forces and cater mainly to expatriates in Singapore.
Governments in Germany and other European countries such as Switzerland have in place more legal provisions on rental control, as renting in these countries is not cheap, especially in major cities such as Munich.
The rents in these countries are controlled by the local government. For instance, the German parliament passed a law a few years back that capped the increase in rental in some places at 15 percent every three years, 5 percent lower than what was stipulated previously. Munich was the first city to implement this law.
More recently, a law was introduced to cap rents, known as a “rent brake”. BBC reported that since the law was introduced, the rent in Berlin has fallen by 3 percent as the law disallows landlords from charging more than 10 percent of the prices set by the authorities.
Home Ownership Versus Housing Rental
As expatriates in Singapore consume the bulk of the rental market, what other housing options do locals have? The government has provided two options: Home ownership and public housing rental.
Home ownership was promoted heavily as the government believes that it would help in the stability of Singapore in many aspects, be in political, social and economic. This option is available to those who can afford to buy a house from the Housing & Development Board (HDB).
For those not in this purchase bracket, renting a house from HDB is still a viable option under the HDB’s Public Rental Scheme. Currently there are 50,000 units available for rent. These units are either one or two-room apartments with tenure lasting for two years.
To qualify for public housing rental, the family household income must not be more than S$1,500 a month. Those eligible will be provided with apartments at highly subsidised rates by HDB (less than S$50 per month). However, it may take at least one and a half years before the applicants are able to receive the apartment due to increasing demands.
There is also another scheme—the Joint Singles Scheme (JSS) that is available for two single persons aged 35 years and above to jointly rent an apartment from HDB. Permanents residents in Singapore who qualify are also eligible to apply.
Eventually, those who are financially stable after a period of time are encouraged to buy an apartment.
On the other side of the globe —Germany, home ownership remains low due to many factors. Most people choose to rent as rent tenancy is more secure and the availability of mortgage credit is regulated.
In other words, the German system has been structured in such a way as to encourage renting. It is important to note that house renting is private in Germany, compared to apartment renting here, which is from the government.
As mentioned earlier, rents are regulated and contracts are standardised and on a long-term basis. As long as rents are paid on time, rental tenure is secure unless the landlord needs the apartment or the building is used for re-development.
In Germany, there is also the availability of good quality rental accommodation. Tenants are even allowed to renovate some parts of the house if they are long-term stayers. For the next set of tenants, it just means paying extra to take over the apartment.
The stringent requirements for mortgage in Germany make it difficult for the people to apply for housing finance. Borrowers are usually required to pay a deposit of 20 percent and provides sufficient guarantees of their ability to finance a loan before a mortgage is granted. Hence, for those who earn little, owning a home is impossible.
The tax scheme in Germany also plays a part in reducing the ownership rate as it is not skewed towards property owners. It is interesting to note that this renting culture can be traced back to the post-war period.
