Today, the decision to buy or rent is not quite as straightforward as it once might have been, with both options having compelling benefits. Home ownership provides the opportunity to build equity and potentially profit on your purchase, as well as the freedom to adapt your home as you wish. Renting, meanwhile, is rather more flexible, and historically has been less expensive.
Does it make financial sense?
When renting, the only costs to cover are the deposit, monthly rent and bills. Buying a property is a greater financial commitment, with a significantly larger down payment as well as solicitors’ fees and various taxes to account for. This said, your monthly mortgage repayments are likely to be smaller than rental payments if your deposit is large enough. Financial experts advise keeping these monthly payments within 28% of your income, which acts as a useful guide when deciding how much to place as a deposit.
The stability of the market inevitably factors into the financial sense of buying or renting. If you are looking for a base in a city with depreciating housing values, it’s evidently more sensible to rent to avoid the prospect of negative equity. Conversely, it is a far better option to buy if prices are set to rise in that location, particularly if you intend on keeping the property for some time to build up equity. An experienced estate agent with local expertise can help you determine which is more beneficial in the area you are exploring.
Are you ready to commit?
During housing market booms, or over lengthy periods of ownership, buying is an attractive investment. It is worth considering how long you are likely to retain the property for, however, as this may impact on its profitability. This is particularly the case if you have a mortgage, as the first few years of repayments will contribute towards the interest, rather than your stake in the property itself. If you sell shortly after buying, you may find the cost of moving outweighs any profit accrued.
This means renting may be the better option for short-term relocation, for example. Similarly, if you are new to a country, renting can be an ideal way to explore different locations before deciding on the one you wish to buy in.
Which best suits your lifestyle?
The amount you wish to invest in property, viewed in context of your lifestyle, will often help determine whether to buy or rent. In many areas, suburban mortgage repayments can equal central city rents. As a consequence, you may decide to rent rather than buy for the sake of location. If short commutes and close proximity to fine dining restaurants, museums and galleries is your main priority, then renting in the city could be more advantageous. Those looking to settle in a quieter location with their families may be better suited to buying a property further towards the outskirts, or in rural locations.
Whether you’re looking to rent or buy a home, Engel & Völkers can assist you in finding the perfect property. We specialise in high-end real restate across 38 countries, so contact our expert agents today for more information.