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Buying houses has become a national obsession and prices across the UK have hit all-time highs in recent month as it seems that everyone is scrambling to own a house. But examining the benefits of buying compared to renting finds that the supposed advantages aren’t all they’re said to be.
In fact, a lot of people's reasoning for buying their home doesn't stand up to rational scrutiny. And that's why a lot of smart money is suggesting people sell home now and leave the herd mentality behind.
Why sell home? Now see the reasons
Some of the reasons commonly given for buying a house are below:
• Buying is cheaper than renting
This is the received wisdom of most homebuyers in the UK and doesn't always bear examination. The effects of mortgage interest over 25 years mean you often have to pay back three times what you borrowed – and in the meantime have to pay for the insurance, maintenance and repair of the property.
According to research by the HBOS banking group, the cost of maintenance and repair for the average UK home is around £500 per year and rising. This means that, before taking inflation into account, owning an average house in a UK will cost nearly two-thirds of a million pounds over the course of a 25-year mortgage.
The cost of renting the average UK home for the same period (again, before inflation is taken into account) would be less than half as much – around £300,000, in fact. Owners would either have to live in the same house for another 26 years – or rely on inflation, which hits you in the pocket in every other area of life – to make buying cheaper than renting.
• Owning your home provides security
Another false premise. No sane landlord would evict well-behaved tenants who keep up with the rent. And renters who lose their job are entitled to housing benefit, meaning the rent gets paid by the government – a safety net that mortgage payers don't have.
• House prices always go up
Broadly speaking, this is true – but it can depend on timing. In the 1990s, house prices slumped for a long time and didn't catch up with their 1991 values until 1997. Many experts predict that the UK is about to enter a similar period now.
Over the longer term, though, house prices have gone up by around eight per cent a year since the Second World War. However, the value of companies on the stock market has gone up by about 11 per cent a year over the same period. Many financial advisors would argue that by investing your money in bricks and mortar instead of stocks and shares, you are actually losing the three per cent a year difference.
The arguments in favour of sell-home-and-rent find more support in continental Europe and the USA, where people don't have the same herd mentality about house ownership.
In the USA – generally considered a financially astute country – people prefer to rent during their working lives; it is cheaper and gives them more flexibility to move with changing job or family circumstances. The money they save is likely to be invested in the stock market, generating better returns on their investments. They will often buy a small property when they retire – generally somewhere sunny and warm.
Following the herd rarely pays off, especially in financial affairs. And many a wise counsel would advise people to sell home now and leave the house-buying herd behind.
Sell home now with The Smarter Choice
The Smarter Choice is a company that's dedicated to helping you to sell your house. We're available 24 hours a day, seven days a week, and we try to ensure that you get a written valuation for your property within 48 hours of your enquiry. We offer a guaranteed, stress-free sale for a fair cash price. Call us FREE on 01632 960543 now or use our online enquiry form and we will get in touch with you as soon as possible.