Buy or Rent?

I’m not convinced by all of these articles I’ve been reading recently about the difference in cost between buying and renting, and I’m not in any way making a comment on the Tories new right to buy plans – we’ll come back to that nonsense another day. Most of the articles promoting buying over renting seem to be written or promoted by bank or building societies keen to sell their mortgage products to us, and most seem to conveniently forget that the cost of buying is likely to increase significantly in the next year or so as interest rates rise. And also seem to forget that in order to compete properly we need a well managed and regulated rental sector with an adequate supply of good quality, affordable housing, but more on that later as well.

According to most of the figures I’ve seen in the last few weeks or so the difference between the monthly cost of renting the average three bedroom house and renting it is small. It wouldn’t take a large rise in interest rates for the advantage to swing the other way, and for buying to become more expensive again.

Those promoting the ‘buying is cheaper than renting’ mantra also conveniently ignore all of the up-front costs involved with buying a house that are unnecessary if you rent – home valuation reports, survey reports and legal fees for example. Oh, and they also seem to have forgotten that fact that the biggest thing stopping most young people buying right now is that they don’t have twenty percent of the value of their new home lying around to use as a deposit.

Not that I’m saying that you shouldn’t ever want to own your own home, far from it. It’s maybe just that we shouldn’t be comparing apples with pears. Buying and renting are not the same things. I know that is stating the obvious, but it needs to be said, and so making a decision to do one or the other because one is ‘cheaper’ than the other right now probably isn’t the smartest thing to do.

You should buy a house because it is the right thing for you to do after taking account of your current circumstances, and remembering that it is a long-term decision. The cost of buying rather than renting will form part of your decision-making process but headline figures telling us that “Buying is £1500 a year cheaper than renting” don’t take all factors into account and should, I think, be taken with a pinch of salt.

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