Is it Better to Buy or Rent?

The question of whether to rent or buy might sound like something of a no-brainer, but are there any circumstances in which renting might be 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 - given the UK's rising population, increasing number of households and failure of housing supply to keep up with demand - 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 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/personalise your home.

That said, there can be some situations in which renting is preferable.

If you are fortunate enough to have a tenancy with a social landlord you will benefit from decent quality housing at an affordable rent. Social landlords (ie local authorities and housing associations) are generally ethically run for the benefit of the tenants and offer access to a well-resourced maintenance network. These days you'll probably need to meet certain criteria (eg of need, or being a so-called "key worker" to get rented social 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 have been a private tenant for a long time (before 1989) and you have a "Regulated tenancy" you most likely enjoy far greater security of tenure than those on more recent Assured or Assured Shorthold tenancies. You are also entitled to pay a "fair rent" as determined by a Rent Officer, which is often substantially below market rate. 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 can apply for housing benefit to help meet the 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 estate agent fees, legal costs, surveys and inspections, stamp duty (tax)... But beware, the longer you stay off the housing ladder, the harder it's likely to be to take the first step.