Do you want to make a conversation with your friends more interesting? Start talking about the benefits of owning a home vs. renting one and you will see how many different opinions there are. Everybody will take sides, and at the end of your fight - because it’s very likely it will degenerate - you will still be left wondering what the pros and cons of buying a house are. Keep on reading because the real estate agents listed on RealEstateAgent.com will help us shed some light on this topic.
In the Anglosphere, success means to own a house and a carQuy tắc tác động đĩa. Homeownership has always been high in the US, but according to Worldatlas, our country didn’t make it in the top 35 countries with the highest number of homeowners. Can you guess which country has the highest homeownership rate? Just one clue - Eastern Europe. If you were thinking about Romania, you were right! At 96.4% Romania is followed by Singapore, at 90.7% and Slovakia, at 90.3%. The homeownership rate is also very high in China, too, at 90%. In Canada, homeownership is similar to the US, at around 65-67%, but declining. In the United States, only 64% of the population own a house. Of those who own a home, only 50% earn more than the median family income (~$61,000/year).
Romania is the second weakest economy in the European Union, yet most people own their house. How is this possible? Yes, homeownership is a proof of success for them, too, but I found that it’s more likely to be a collective mentality that stems from the communist dictatorship when almost all workers were able to afford a house or an apartment. During the communist era, everybody could buy a dwelling at a very low interest rate. Now, they do not analyze the pros and cons of buying a house. They buy because they HAVE TO. Nowadays, incomes remain very low, while interest rates are skyrocketing, and most Romanians are looking at the currency exchange rate with fear and doubt. Many have loans in a foreign currency. Besides this, houses are usually appraised in euro, and the rent payments are paid in euro, as well, not in the local currency. With the euro at its highest levels, Romanians are losing money.
While only 36% of the US population is renting, over the pond, in Switzerland, 56.6% are in a lease agreement, of which only half are Swiss families and individuals. The other half are public authorities, businesses, and other groups. The next countries with high percentages of households that rent are Germany (48.1%), South Korea (44.8%), and Austria (44.3%), according to Statista. And if you didn’t know, renters have outnumbered homeowners in London. Here, housing is getting so unaffordable that 60% of Londoners will be renting by 2025. But the cherry on top is Paris - the City of Lights. This is the most expensive European capital, with the highest rents.
Back at home, the median asking price for vacant rental units in the US, in 2018, was “only” $1,003, according to the US Census Bureau. So, a family with a median income will spend around 20% of it on rent. People in their 20s are more likely to rent than buy.
However, the Swiss pay more for housing, with an average monthly rent of about $1,395. So why do Swiss still prefer to rent rather than buy? How do they weigh in the benefits of owning a home vs. renting? Well, it has very much to do with their culture, with their mentality, with risk aversion.Quy tắc tác động đĩa Another cause for their preference for renting could be that people got burned badly during the last boom. Now, most people can’t afford the 20% deposit, and many are considering other investment opportunities and exchange the right to own a house for more freedom. Not having a long term debt leaves more doors open.
A good friend of mine had also a different idea of freedom. So, when he went to the bank to find out more about the home buying process, he felt as if the bank was robbing him. “What I understood was that I should empty my bank account to the last rappen, give the bank all my savings only to get in return a massive debt for decades of my life,” he said. But other people simply can’t save money if they are not forced to. So a mortgage is like a strong coffee for them - it keeps them awake, it keeps them busy, it keeps them motivated. And this tends to be true especially for people who do not have good financial skills. All in all, there is no right or wrong. Just make sure you ARE and WILL BE happy!
According to Andrew Oswald, Professor of Economics at the University of Warwick, the more people own their houses, the slower the economy. When you state something like this, you throw to the bin all the advantages of buying a house. But let’s not jump to the wrong conclusion. If we look at Romania, his statement might be correct. Even though 96.4% of Romanians own their home, the economy is lagging way behind those of other EU member states. But it is good to remember that correlation does not imply causation.
When asking people why do they buy a property, our real estate agents hear one of these answers:
Most homebuyers are looking for a safe place for their money and for their families, too. Who doesn’t want a property that increases in value over time? This is often regarded as the main advantage of owning, but it doesn’t always materialize.
Owning a house gives you the freedom to decorate and to make it as cozy and homey as possible. You can paint it as you wish, you can bring new furniture in, and if the property has a basement that is not finished, you can find many basement remodel ideas online. So you can alter the property and turn it into the house of your dreams. Anyway, this seems to be one of the best benefits of owning a home vs. renting.
Buying an investment property is not on everybody’s mind since there are many risks involved. However, with some good advice from an experienced real estate agent, you can find some amazing deals on the market. Ideally, you want to find a property that pays for itself. Make sure that before you take advantage of buying a house you understand what it means to become a real estate investor!
Quy tắc tác động đĩaFor every advantage, though, there is a disadvantage.
Quy tắc tác động đĩaDuring the buying process and during home visits, you may overlook many economic aspects. Your property may remain at the same price or be priced even lower due to factors like:
A huge responsibility! As a homeowner, you have to take care of everything that breaks in your house, from a leaking faucet to a damaged roof. Many might include it among the advantages of buying a house because you can supervise the workers and get the best quality for their money. But costs add up.
Besides the huge down payment for a loan, the right to own comes with a few fixed costs: property taxes, homeowners insurance, mortgage insurance (for down payments of less than 20%), pest control, trash pickup, and other utilities. For some properties, the HOA fees can also be substantial, and their rules may limit your creative freedom.
If you have a variable interest rate on your mortgage, it can increase your monthly payments. Besides these, a house is illiquid, so you give up your cash for a pile of brick and mortar - this is an opportunity cost. What if you could do something better with your money?
Quy tắc tác động đĩaIf you have bought a rental property, be prepared to face some vacancy periods and even trials.
Every coin has two sides and real estate agents from RealEstateAgent.com deal with home buyers and renters too, so they agree with the following points on renting:
It is far more easy to relocate when you are not tied to a mortgage. You have fewer responsibilities, which means that you can dedicate your time and energy to the things you love and care about. Besides, when renting, you can move more often and experience more neighborhoods or cities. You get to live more fully!
Quy tắc tác động đĩaWhen you rent, you usually know how much you owe every month. Of course, the rent may increase every time you renew, but if the place becomes too expensive, you can always find a cheaper place to live. No need to worry about maintenance - the everything. So, the cost of renting could be lower than that of owning a house.
Quy tắc tác động đĩaAfter paying the rent, you may have plenty of money left to invest or to spend as you wish. You may even save more money!
Of course, renting has its own disadvantages. Here are the main ones, according to our real estate agents:
Quy tắc tác động đĩaYou are limited by the lease agreement. You cannot decorate the place as you please, but you can still add some photos or colorful pillows to make the place look more YOU.
In a sought-after neighborhood, rent may have a steep increase. You have to be aware of the inflation rate because it is more likely to affect your rent amount.
Quy tắc tác động đĩaBut there are areas in our country where it is cheaper to buy than to rent. So, when your monthly payments would be lower or similar to the rent you pay, it might be smarter to sign a mortgage contract with a fixed interest.
Quy tắc tác động đĩaThere is the risk that the landlord will not renew the lease when it expires. It might be because he wants to lease it to a close friend or relative, or (s)he wants to move there with his/her family. Or maybe the landlord simply wants to sell the property. So there is this uncertainty that could get stressful sometimes.
Statistics prove that homeownership is not for everybody. On the other hand, renting does not provide too much stability. Can you identify more benefits of owning a home vs. renting? Leave a comment and we will post the best pros and cons of renting vs. owning! Would you rent or buy?
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