Buying vs. Renting
It's not uncommon to see people around us struggling between renting and buying their own home. Indeed, there are many advantages to buying a home versus renting one. View these advantages in the Buy vs. Rent Comparison Chart.
Why Buying a Home is a Good Idea? Drawbacks to Buying a Home:
A very safe investment:
As a fairly general rule, homes appreciate about 4 to 5 percent a year. Some years will be more, some less. The figure of course varies from neighborhood to neighborhood.
Opportunity Cost:
You’re no longer able to invest your down payment or monthly equity payments into other markets. Your money is tied to your house.
Property builds equity:
In Hong Kong, the most common way to accumulate wealth is through homeownership. Very often, homeowners have “unrealized wealth” in their properties, which means their properties are worth more than what they owe on them. This is also called "Equity Savings”. They own assets that appreciate in value. The most common way to realize this “unrealized wealth” is to refinance or sell the properties. Some owners who sell their properties use some of profit to buy a bigger, better, or newer home.
Loss of equity:
When the home value goes down, so does your equity. Your equity also loses value when the value of dollar declines.
Free to customize your own home:
You can do whatever you want that makes your home a comfortable place for you and your family. It’s your home, not a temporary place to sleep and eat.
Additional Monthly Expenses:
Homeowners are responsible for 1) Property Taxes e.g. government rate; 2) Home/Hazard Insurance; 3) Utilities; 4) Maintenance; 5) Membership Fee e.g. Club House Facilities
Sense of belonging, community, stability, and security:
Everything belongs to you!
Less Mobility:
It takes longer time to move if you need to sell your house at a desirable value.
Stable Monthly Housing Costs:
If you get a fixed rate mortgage, you have the same monthly payment amount for thirty years. Even if you get an adjustable rate mortgage, your payment will stay within a certain range.
Forced Savings:
It is often challenging for some people with the desire to spend money to save money. A house is an automatic savings account. This “equity savings” may even appreciate.
Why Renting a Home is a Good Idea? Drawbacks to Renting a Home:
Money Up-front:
If you are an entrepreneur or investor who is able to take a sum of money and make more money out of it, you have to consider the opportunity cost of having your money locked up in your house.
Renting does not accumulate wealth:
you are just throwing money away.
Ease of Moving:
You can move whenever and whatever you feel like. Let’s say, you move for a lower rental, nicer environment, and better Fung Shui.
Possibility of eviction:
Owners may terminate the tenancy agreement with you for their own sake, e.g. selling the property.
Little or no responsibility for maintenance:
Tenants are usually not responsible for any building maintenance.
Changes limited:
As a renter, you are limited on what changes you can make to your living quarters.