It’s a question that was a no-brainer for decades, but the waters have been muddied in recent years when it comes to the 50/50 poser: Should I buy a property or rent one?
The buying generation, parents of pretty much anyone in their twenties, thirties or forties, would be horrified at the thought of their offspring renting for the rest of their lives.
“You’re just paying off someone else’s mortgage…”
True, but research undertaken as recently as last year suggests homeowners would need to run their property for a decade before returns from the rent they are no longer paying begins to overtake the cost of buying. So not such a clear cut decision after all, then.
That’s without even venturing into the not at all insignificant fact that many people in 2018 simply cannot afford to buy a home.
But if you can get on the ladder and, more importantly, if your personal circumstances make home ownership worthwhile then there is certainly much to be gained from getting up on those rungs.
Confused? Let us help you out with some pros and cons for both renting and buying…
RENTING PROS
1. Flexibility: Like home ownership, the ‘job for life’ mindset of the Baby Boomer generation is fast becoming a thing of the past, with Millennials keen to keep their options open in all aspects of their lives, especially employment. So, for those who wish to ‘job hop’ in order to get ahead, buying a home makes little sense and the flexibility of being able to move when you need to is far more appealing.
2. Speed: The buying process is notoriously slow. Delayed searches at the whim of the local authority, endless buyer enquiries, long chains… buying a home can be a sluggish and stressful experience. Finding and renting a home, on the other hand, can be done in no time at all and you can be in and settled in a fraction of the time it takes to complete a purchase.
3. Low risk: We’re not used to property prices falling in the UK, but there’s always a chance. In the 2007-08 financial crisis, property values dipped by around 15%, plunging many homeowners with high mortgages into negative equity. Most areas in the UK more than recovered over the following decade but while all that financial turmoil was unfolding, those renting just carried on as normal.
4. No repairs: Homeowners often don’t factor in the costs of maintaining their properties when attempting to lord it over those in the rental sector. If anything goes wrong in your rental property, a quick call to the landlord or managing agent can see it resolved at no cost to the tenant, while the homeowner sits glum-faced staring at the £2,000 bill for a new boiler.
5. Location, Location, Location: We all want to live in a nice area, but buying in a dream postcode can be out of reach for many. Renting, on the other hand, could mean being able to live in a bigger home in a better area.
RENTING CONS
1. Money down a black hole: Yes, it’s true to an extent what those Baby Boomers say: You are paying off your landlord’s mortgage and probably securing his or her pension for retirement, rather than your own.
2. No roots: So, you have the flexibility that renting offers, but that flexibility is also available to the landlord as the property’s owner. If they wish to let to new tenants or, perhaps, sell the property, you may have to leave when you don’t want to. That means finding somewhere else to live and dealing with the costs associated with a move.
3. It’s not your space: The best thing for many when buying a home is being able to put an individual stamp on a property. When you rent, your landlord can place restrictions on what you can do to the home, meaning magnolia walls simply have to be accepted.
4. Rent increases: The landlord can put up the rent – and many currently are to negate the impact of the section 24 ‘Tenant Tax’ currently being phased in. That could place an unexpected demand on your monthly outgoings.
5. Property value: The landlord may agree to improve the property at your request, perhaps adding a conservatory or renovating. This will benefit you while you remain at the property, but the only person to benefit from an increase in property value will be the landlord.
BUYING PROS
1. Investment: Whether buying or renting, the chances are there will be money going out of your account each month to fund the roof over your head. If you own the property, that money is going towards owning your home outright, rather than paying for a landlord to do the same.
2. Making a profit: House prices, aside from the 2008 crash, have risen steadily over the past decade, meaning many homeowners will have made a tidy profit on the value of their homes. Whether that’s building a pot for retirement, or using the equity to move up a rung on the property ladder, this can only be a good thing.
3. My home, my rules: Want to paint that wall pink? Or add some nostalgic 1980s Paisley wallpaper? Go on, then – it’s your place. As a homeowner, although within the restraints of things like planning permission, you can do whatever you like to your property with needing to get the permission of your landlord.
4. Stay put: As long as you continue to pay your mortgage (if you have one), you can stay in the property long-term rather than wondering what comes next at the end of a tenancy agreement with a landlord.
5. Better value: Depending on the size of your mortgage, paying one off can sometimes be cheaper than a monthly rental cost.
BUYING CONS
1. How much? Even with Chancellor Philip Hammond’s ‘on paper’ generous changes to stamp duty costs for home buyers last year, the dreaded duty can still wipe out far more of your deposit than you’d like. It can also make owning a home pricier than renting one.
2. Break-ups: If you own a property jointly with your partner and split up, the division of who is owed what can be complicated and add a great deal of stress to an already difficult time.
3. The rate of change: Interest rates have been at rock bottom now for quite a number of years, but a sharp rate rise from the Bank of England can greatly affect those not locked in to fixed rate mortgages. Just ask homeowners from the 1990s when mortgage interest rates touched 15% for a time…
4. Time is money: Compared with moving between rental properties, selling and buying can take up to eight or nine months to complete in some cases, meaning if you need to move quickly, you are at the mercy of solicitors and chains.
5. Pressure: Owning a home is the biggest financial commitment you can take on. If you fall behind on your mortgage payments, there can be serious consequences like bankruptcy or repossession.
