Rent or Buy a Property. What is best and does it matter?
Buying and owning a house has long been the dream for most young people in the UK. However with house prices showing no sign of becoming any more affordable, owning property is fast becoming unattainable for many people within their lifetimes.
The question at hand is, does it really matter whether you buy or rent a home and what are the cost differences?
The letting market is still set up in such a way as to promote the idea that rented accommodation is temporary. With many contracts being only for six months or a year, or allowing either party to cancel a rolling contract with a month’s notice, it is perhaps not surprising that most people prefer to feel the permanence of their own walls around them.
It is perhaps at this time that the letting market should be starting to think more along the lines of the types of letting contracts that councils have been using for council houses for many years, and the type of contracts that are used in countries such as Germany, where the concept of owning a house is slightly absurd and the vast majority of people rent.
If you look at the direct cost of renting against buying you are likely to find that over 30 years you will pay approximately the same amount of money for living in your property.
At the end of that 30 years the people who have been renting do not own anything and the people who have scrimped and saved own their house.
At first glance it would appear that those who own their house are much better off. Then stop to ask the question about how much money the people that own their house have put into it in terms of repairs, modifications, decoration and general upkeep. They have also paid far more than their house is worth because of the interest rates that are charged by banks. If that is added to the grand calculation, the renters could probably add another five to ten years of rent before they hit the same amount of money.
The renters would also have had a great deal less stress as if anything went wrong, all they had to do was make a phone call and someone else would come and sort out their problem.
The other thing about renting is that moving is much easier. There is no stamp duty, solicitors or estate agents to pay and it is possible to choose a moving date rather than wait for that elusive buyer to turn up and make an offer. In a time when people change their life goals, their careers, and also the place they live, in financial terms in the long run, it can actually end up costing significantly less to rent a home than to own one.
Perhaps with some adjustments in mind set and letting contracts the idea of long term letting will take off.