Somewhat over a decade ago we all knew the answer to that question. Personal circumstances permitting, buying was the preferred option and renting was seen as “a waste of money” although even then this was not always true.

We often accept without question certain assertions that society holds to be absolute truths but which depend greatly on personal circumstances (mobility, flexibility, financial stability, family situation, etc.) or the economic or social context.

At Testa Residencial we have always questioned this maxim, because often renting a home is a better option financially than buying one. If we crunch the numbers, renting a home often works out as a better choice than buying.

Moreover, if we are thinking of buying or renting a home in a large city, we need to pay even greater attention to the numbers. Both buying and renting a home is always dearer in large cities such as Madrid or Barcelona, compared to smaller ones such as Teruel or Badajoz.

In this case we need to look at the way home buying or renting prices have fluctuated, and compare one against the other. In this respect, according to the IV Solvia Market View 2019, the price of buying a house in Madrid has risen sharply, more so than in Barcelona, for example, where prices continue to increase but more gently. While in Madrid in 2019 house prices rose 7 per cent vs 2018, rental prices rose 5 per cent.

Buy or rent? When it’s better to rent

Among the reasons why it is better to rent rather than to buy your home we would highlight:

  1. Renting allows for easier and quicker mobility when:
    1. Our financial situation has changed and we have to cut costs by looking for a more economical rental home.
    2. We need to move for career reasons.
    3. Our family situation changes: if the family grows and we need another bedroom, for example.
  2. In the event that we lose our job renting means less risk. It is easier to pay a monthly rent than decades of mortgage.
  3. There are none of the expenses associated with ownership. Buying a house means, in addition to paying the mortgage, having to pay a number of expenses such as the community charge, communal repair charges, insurance, etc. When renting a home it is the landlord who pays these costs.
  4. The landlord also pays for any improvements to the rental property. Bear in mind that just as a result of wear and tear, every ten or fifteen years a certain amount of money has to be invested on renovating a property.
  5. And talking about investments and when considering whether to rent or buy, the belief that buying a house is an investment is not entirely true. At least, above all in the long term. Traditionally it has been said that the value of a property always tends to increase over time and on occasions this is true but not always. It depends on market prices at the time of purchase. We also need to take into account the effect of inflation and the taxes involved in the operation to calculate the true return on the investment over a certain period of time.
  6. Also, when buying, you have to have saved up the deposit which is usually around 30 per cent of the cost of the property in order to execute the mortgage. When renting, the security deposit usually consists of two or three months’ rent.
  7. If when it comes to choosing between buying or renting you have decided on the former, and you have already paid the first mortgage instalment, you consider yourself to be the owner already. But the saying that the house “belongs to the bank” is true; until you pay off the mortgage which usually takes about 40 years on average and depends on the terms and conditions thereof, bear in mind that instalment payments can vary.
  8. And what happens if you die and haven’t finished paying the mortgage? In that case, the debt passes to your heirs.

So, before deciding whether to rent or buy your home, at Testa Residencial we recommend considering the following aspects:

  • Personal and work circumstances
  • Financial situation
  • Available savings
  • Financial and work stability

And if at the end of all this analysis the answer to the question “rent or buy?” is rent, place your trust in professionals who can guarantee that the advantages of home renting will materialise and remember that when it comes to home renting, at Testa Residencial we are that kind of professional.

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