“Buying property is the best investment you can make.”
For many, many years, this mantra dominated the economy, and no one suspected that prices could go down. But they did. We all know someone or have heard stories of buyers who have lost a lot of money because of a bad investment in a house or apartment.
In view of the recent past, many people fear purchasing their own home. But they also say that living rented is throwing money away. So, what to do? Buy or rent? Is it true that the mortgage rate, as many people say, is today often less than the monthly payment that a tenant pays? In short, how to get it right?
One mortgage broker Colchester has, suggests that it is a matter of time. Renting is a good option in the short and medium term, since it does not require any big investment to obtain a flat, or even a house. But, in the long term, the majority opt for purchase, because it allows the amortization of the high initial cost faced by those who acquire a house.
If you exceed 5 years renting, the purchase and sale of an equivalent property is more profitable, according to experts.
But since the “short” and “long term” are very uncertain terms, it is important to translate these concepts into concrete time horizons. It could be said that if you are going to exceed five years renting, purchase is more profitable. However, that is only on average, as there are analysts who talk about three years, and others say eight.
With this backdrop, it is essential to take into account the personal factors that intervene in the dilemma of whether to buy or rent. And, above all, it is crucial to look at your own financial circumstances to analyse the pros and cons of each option.
In favour of purchasing
Interest rates are at historic lows, which has expanded the supply of competitive mortgages. All this at a time when the real estate market is beginning to recover: forecasts rule out further falls and even point to a progressive increase in prices in an annual range of up to 5%, driven by low financing costs and the economic cycle.
Alternatively, you could buy, and then rent that home to get a return. There is no shortage of candidates, as the number of people living on leases has multiplied by three since the financial crisis, exceeding 20%. This can be a good investment option given the uncertainty of the stock market and the low profitability of deposits. Profitability is at its highest since 2007 in the case of rent, and experts expect the price of rental housing to grow more than 10% this year.
Housing tends to be continually revalued. But history now shows that prices can also fall. And although nothing points today to another bubble, no one can discard it, leaving the buyer tied to their home and with the constant fear that rates rise during the time they are paying the mortgage. The mortgage and associated high expenses of ownership are among the biggest drawbacks.
In favour of renting
It is often said that it is the best option as a temporary solution or as a measure linked to the mobility of the tenant. Without the ties of a mortgage and without having to pay the initial expenses, a lease allows flexibility to change if circumstances change.
In addition, you can usually save on expenses such as the residents association, insurance or maintenance of the apartment. This saving allows, in turn, to dedicate money to other necessities or to invest in the stock market or deposits, where remuneration could rise while the interest rates for the buyers of apartments rise.
Property owners often argue that the worst thing about renting is that you pay rent every month, but you will not have any property to show for it. It is what some call – throwing money away.
The rent also depends a lot on who owns the apartment. In addition, you have to take into account that the monthly rent payment does not always remain unchanged, a point that is sometimes forgotten.
It is true that, except for mortgages at a fixed rate, buyers’ payments also vary, but these fluctuations may be lower. The difference is that whoever buys a flat has the obligation to continue paying the bank, while a tenant can always move to a cheaper apartment or house.