There is no doubt about it, choosing between renting and buying a home is one of the most important decisions that you will ever take. There are also a number of economic and social factors on which to base such a decision, while the fact that many of these are variable make the challenge even harder for citizens.
As a starting point, it is important to consider the short and long-term costs of buying and renting property in the current market. Even then, however, the decision is far from straightforward, as you take into account your own personal requirements and consider these alongside the constantly changing landscape of the market.
Renting or buying: What are the key considerations?
With this in mind, here are some of the key considerations when determining whether or to rent or buy in the contemporary market: –
The Cost of renting is likely to increase sharply during the next Decade and beyond
Most western property markets have been distinguished by sales price growth during the last 18 months, although this trend is set to change in the years to come. In the UK market, for example, the cost of renting is set to increase annually by 7.5% over the course of the next 18 years, while the corresponding cost in America’s most expensive cities is also set to increase exponentially.
In contrast, resale prices may have peaked and are beginning to consolidate amid widespread government measures. This is not only likely to drive a greater equilibrium between supply and demand in the resale market, but it will also make buying an increasingly cost-effective exercise over the course of the next decade.
Your Personal Requirements and long-term goals
While the new car sales market may have peaked in 2015, it has been impacted recently by the rising popularity of leasing. Although some question the financial viability of this, the flexible and convenient nature of leasing appeals to modern consumers while it also relieves the perceived costs and burden of ownership.
The same principle can be applied to renting property, particularly with the average western citizen now changing jobs every two or three years. Given the cost and hardship associated with selling property, younger citizens who are career focused and ambitious are more inclined to rent living space until they settle down in their older age.
In this respect, your lifestyle choices and short-term career plans are influential in determining your choice of buying or renting, so keep these in mind before making a final decision.
Your financial Circumstances
In some instances, the nature of choice is restricted by specific limitations. This can make the decision easier, although it is less empowering as your preferred option may be beyond your means.
Given the cost of buying a home in the contemporary market, for example, it is recommended that you are able to stake an initial deposit of approximately 15% or 20%. This equates to a $50,000 down-payments on a $300,000 property, which for some may represent an annual salary. The situation is complicated further by the nature of your employments, with freelancers and self-employed individuals often subject to greater scrutiny by lenders. In these instances, you may not be able to buy (or at least invest in your home of choice) without altering your lifestyle and planning ahead for the near-term future.
In contrast, renting is accessible to anyone who has three months employment history and a relatively clean credit history. This makes it a far more viable interim prospect, regardless of whether or not you intend to rent over several years. If renting does indeed appeal as a necessary but ultimately short-term option, be sure to stick to rolling lease agreements that do not exceed six months at any time.