Buying versus renting

The rapid increase in property prices has made home ownership difficult for many would-be first time buyers.
Sometimes sacrifices are required in order to fulfill the long term goal of home ownership. Saving strategies, budgeting, and tight financial planning is essential.

Since not everyone is willing or able to make necessary commitments it helps to consider some of the pros and cons of buying and renting as a viable alternative.

Understanding your actual motivation to buy (examining the priorities) vs Keeping aligned with the desired lifestyle

Pros of Buying:

- Fixed cost
No lease conditions, cost of rent, to worry about.

- Security
A sense of security, stability and satisfaction. No worries about the length of your tenancy. A desire to 'own' and build our home.

- Savings
Making repayments is very much a form of forced savings. Once the mortgage is paid off, your financial responsibilities would be significantly lightened.

- Investment
Your home is an equity. If the value is appreciates or maintains value, it is a growing asset. This equity can also be used to secure loans or at the very least, provide retirement security.

- Lifestyle
Fulfilling a desired lifestyle and type of home for it is a huge incentive to own a home. Owning your own home provides the freedom to change and improve your house, and the process itself can become a productive hobby while increasing the value of the property. Whereas time, money and effort spent on decoration and gardening on a rented premise, will not return. Also, in most cases, the landlord would not have allowed any modification. Whereas

- Status
From a financial viewpoint, a homeowner making regular mortgage payments, will establish a favourable credit rating with financial institutions.

- Tax incentives
Interest on mortgage payments are tax deductible. For properties purchased for investment purposes, an investor who lets their property to tenants can take advantage of the tax benefits of negative gearing.

Disadvantages

- Depreciation
There is a risk in any investment that its value will depreciate. When property value depreciates, your flexibility to sell is limited.

- Deposit
The initial deposit alone can easily take up several years of savings.

- Servicing the loan
Installments are a huge financial commitment and would impact the lifestyle which ironically was what you were seeking in getting your own home.

- Interest rates
If your mortgage is subject to a rise in interest rates, repayments become more difficult. While rents may also increases, negotiation with the landlord may be possible, or simply move to more affordable alternatives.

- Unseen costs
Home-ownership can be more expensive than renting when the cost of insurance, maintenance and repairs of the property, council rates cumulates.

- Immobility
Either for career or lifestyle reasons, some people prefer to move around regularly. To them, being bound to one place constraints their sense of freedom. If without a proper investment strategy, the transaction costs in buying and selling every few years may cancel out any appreciation of the property.