Independence is a complex step. Beyond the difficulties of living without the protection and direct help of the family, choosing between renting or buying a home is a decision that can mark the financial future of a person forever. Therefore, it is necessary to take into account certain parameters to make the optimal decision or, at least, suboptimal. Where are they, how are they and how much are the houses sold by the banks?
Emily Oster, professor of economics at Brown University, explains that it is very important to set a clear time horizon. Buying a home involves incurring certain fixed costs that are only profitable over the years. The deadline is everything
According to this expert everything is determined by the time period. Since both the rental price and the purchase price always tend to balance in the long term, that is, if there were few houses for rent and the demand remains constant, prices would skyrocket, so many homeowners and builders would put Its stock in rent to occupy that empty space in the offer until the price recovered the initial balance.
The same thing happens with the offer of housing for sale. In the end the sale of housing and rent are complemented by being almost perfectly replaceable goods, one influences the price of the other and vice versa.
Therefore, this expert explains that a 30 year old who is becoming independent and wants to find a home in which to spend the rest of his life, or at least more than 30 years, fixed costs (notary, commissions and others) are left amortized, so this expert advises to buy.
Conversely, if the idea is to change homes shortly, this radically changes the effective cost of buying a home, since the price of the home can vary sensibly in a short time, as it has been Seen after the financial crisis of 2007.
Housing does not always go up. Oster points out that the argument used for years (housing always goes up) to buy a house whatever the time horizon of the future holder is a serious mistake. "You do not have to go very far in history to see that argument is not true."
In addition, it must be taken into account that when buying a home incur many expenses associated: notary, registration, VAT, documented legal acts, management, etc. In the end these expenses usually assume about 12% of the value of the house. On the other hand, a home usually comes with insurance, the Real Estate Tax, community (in case of flats) other costs that the case of rent is responsible for covering (almost always) the landlord.
It is important to calculate all these costs and divide them into months to analyze which option would be more profitable according to the time horizon of occupation of the house that each individual manages.