Mastering the 30% Rule for Renting in Singapore

Singapore, with its bustling city life and rich culture, can be a thrilling adventure for Australian expats. But as you’re settling into your new surroundings, it's crucial to understand the financial nuances, especially when it comes to housing.

Today, we're going to delve into the 30% Rule of Rent, a vital budgeting tool to help you manage your finances effectively.

What is the 30% Rule of Rent?

The 30% Rule of Rent suggests that you should spend no more than 30% of your net income on housing costs. Why 30%? This threshold allows you to balance your budget, covering other essential expenses like groceries, transportation, healthcare, and savings. Remember, this rule is based on your net income - after all your tax obligations have been deducted. To calculate your net income in Singapore, use the tax calculator on the IRAS website here.

Case Study 1: Renting a $5,000-per-month Property

Let's imagine you're eyeing a property that costs SGD 5,000 per month. According to the 30% Rule, this should be no more than 30% of your monthly net income. Here's how to calculate your required income:

Monthly Rent (100%) = SGD 5,000

Your Net Monthly Income (≥ 100/30 x Monthly Rent) = SGD 16,666.67

This means you'd need to bring home at least SGD 16,666.67 per month after tax to comfortably afford this property, according to the 30% Rule. From the 2023 tax calculator, we can determine that you would need to earn approximately S$225,000 per annum to cover this.

Case Study 2: Renting an $8,000-per-month Property

What if you've set your sights higher, on a SGD 8,000 per month rental property? Using the same principle:

Monthly Rent (100%) = SGD 8,000

Your Net Monthly Income (≥ 100/30 x Monthly Rent) = SGD 26,666.67

In this scenario, you'd need a net monthly income of at least SGD 26,666.67 to afford this property comfortably while following the 30% Rule. This would require a gross annual income of at least S$377,000.

Case Study 3: Renting a $15,000-per-month Property

Now, let's say you're considering a luxury property with a monthly rent of SGD 15,000. Following the same calculation:

Monthly Rent (100%) = SGD 15,000

Your Net Monthly Income (≥ 100/30 x Monthly Rent) = SGD 50,000

In this case, your after-tax monthly income needs to be at least SGD 50,000 to afford the rent while adhering to the 30% rule. In this case, you would need to earn a gross income of at least S$735,000 per annum approximately.

Challenges in Following the 30% Rule in Singapore

While the 30% Rule provides a helpful benchmark, it might pose challenges, given Singapore's high cost of living. The rental market in Singapore can be expensive, particularly for high-quality properties in desirable locations. This means that even with a substantial income, you may find that suitable properties exceed 30% of your net income.

Remember, the 30% Rule is a guideline, not a hard and fast rule. It's vital to look at your overall budget, considering all your regular expenses and financial goals. If your rental costs slightly more than 30% of your net income, but you're able to cut back in other areas or if your income is significantly higher than average, you may still be able to rent that dream property without jeopardising your financial health.

The Bottom Line

Managing your finances while navigating life in a new city can be challenging. By understanding the 30% Rule and how it applies to your unique situation, you can make informed decisions that support your financial wellbeing. Whether you're just moving to Singapore or have been living here for years, adhering to this rule can help ensure you enjoy your time without the burden of financial stress.

Remember, each individual's financial situation is unique, and you should consider seeking advice from a financial planner or professional to understand the full picture of your financial health in Singapore. Your dream home is out there - and with careful planning and smart decision-making, it can indeed become a reality.


To Your Financial Success!


Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd - No: 200305462G | MAS License No: FA100035-3

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General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.

*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.

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