New research carried out by the financial researcher at The University of Stirling, Dr Isaac Tabner, claims that the financial benefit of renting rather than owning a property may have been majorly underrated. He goes on to mention that the cost of renting includes many additional expenses incurred by home owners, such as building insurance and property maintenance.
These additional ‘hidden’ expenses are often overlooked by a simple comparison between rent process and mortgage costs and can lead to an overestimate of the financial benefits of owning versus renting.
New research published in the International Review of Financial Analysis, provides an explanation of how costs of renting versus buying a home can be compared, whilst taking tenants’ and owners’ own personal circumstances and macro-economic conditions into account. The study shows that during periods of deflation or zero inflation, people who are renting are generally better-off financially.
Overall, homeowners who sell up within five to ten years are likely to shell out more cash through buying rather than if they had rented. This is because even when economic conditions are favourable, households may need to own their property for five to ten years before they have sufficient returns from the rent they are no longer paying to compensate for the buying costs.