Q

Should I rent or buy?

A

It depends. Owning real estate isn't necessarily a good investment.

Buying a house or a flat has long been one of the milestones of adulthood — along with having kids and an unaccountable newfound fondness for Elton John ballads. But is buying a home necessarily the best investment?

To be totally honest — no, in many, many cases, it is not. Number crunchers like University of Stirling financial researcher Dr. Isaac Tabner point out that the benefits of renting have long been underrated. A major incentive for home ownership is called “imputed rent” — the rent that you don’t pay if you buy a house. Tabner points out that it takes on average between 5 and 10 years of homeownership for the imputed rent to equal the high transaction costs of buying a home — niggling expenses such as stamp duty, homebuyer surveys, and solicitor’s fees that will land you deep in the proverbial hole. And owing to a long run of low interest rates along with government incentives for home buying, home prices, especially in London, may be overpriced, according to some. Though rising real estate prices throughout the UK have made real estate a better investment than share investment since 2000 — however over the last 30 years, share prices have delivered a 1,433 percent return, or 9.9 percent on average a year, a figure considerably higher than real estate returns of the same period.

But here’s the £1,000,000 question: are you the type to squirrel away any money you might be saving by renting? Or might you instead spend all your extra money on designer handbags or top shelf liquor? Without that monthly mortgage payment some would put away nothing at all. And for many, home ownership provides the kind of joy that’s just not quantifiable. Here’s the bottom line: a home purchase should never be viewed at as a pure money making scheme, and like any major investment you should absolutely have a long-term view. A house where you can raise your family? Great idea. A flat you scoop up in hopes of making a killing by flipping it in a few years? Inadvisable.

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