The question of whether to rent or buy might sound like something of a no-brainer, but are there any circumstances in which renting is preferable to owning?
Let’s begin with a brief reminder of the benefits of ownership.
Although paying a mortgage can initially be more expensive than renting, over time it becomes relatively cheaper as wages and prices in general rise but repayments stay more or less constant (they can fluctuate with interest rates but can go down as well as up). And of course on happy day the mortgage will be paid off and your home will be all yours.
Additionally property prices tend to rise steadily over time so your equity will increase. Although house prices can fluctuate in the short term (like now) – given the rising population, increasing number of households and limited supply of land – it’s likely the long term trend will continue upwards.
Finally, there’s the intangible feeling of satisfaction that comes from knowing you own the walls around you and the roof over your head. You want purple walls, you’ve got it!
By contrast you can pay rent for 100 years, your home equity remains precisely zero. If you rent privately you can be often be asked to vacate your home at just a couple of month’s notice. And you are generally restricted in the degree to which you can decorate/personalize your home.
That said, there can be some situations in which renting might be preferable.
If you are fortunate enough to public housing tenant you will benefit from decent quality housing at an affordable rent. Public housing is generally ethically run for the benefit of the tenants and offer access to a well-resourced maintenance network. You’ll probably need to meet certain criteria (eg of low income or status) to get rented public housing. But if you are in such a position you need to consider carefully trading security for the benefits (and risks) of ownership.
If you rent privately you may enjoy certain legal benefits and protection, depending on where you live. These may include security of tenure (ie you cannot be evicted without good reason) and rent controls (ie limitations on the rent you can be charged and/or the amount and frequency of increases). These are significant benefits that may not be worth giving up for ownership.
If you’re on a low income the lower risks of renting may be more appropriate. If you fail to meet mortgage payments your home could be repossessed and your credit rating shattered. In rented accommodation you may be eligible for assistance towards costs. A further risk of ownership is the possibility of major repairs being needed, eg a new roof, which can run into thousands of pounds.
If you tend to move often, eg for work, renting can be preferable to ownership due to the high costs of the buying/selling process, ie realtor commission, legal costs, property inspections, tax… But beware, the longer you stay off the housing ladder, the harder it’s likely to be to take the first step.
