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5/01/2009 To rent versus buying a house
In Spain, traditionally we have shown preference for the purchase of house sustained in several reasons:
- The belief that the buildings always raise of value reason why supposed a good alternative of investment.
- The money destined to rent we think that it is “spent� money whereas the dedicated one to the acquisition of a mortgage is “inverted� money.
- High inflation that brings about an ascent of the price of the rent and the value of the buildings.
- Little favorable legislation to the rent as far as the difficulty to throw to a weak renter and to the taxation of the income by rents.
- Usually we do not move of residence to look for use, thus when acquiring a house we did not feel that it generates no obligation to us.
- To have a house to when we do not have so many income (retirement) or need to pay anybody so that it takes care of to us.
These axioms, are changing lately and not because we want but because the national and international situation is forcing to change our decisions to us. 
- We are attending a slope in the prices of the buildings that is taking ahead first of the reasons for which we acquired houses. This slope, is being moderate so far, but we both followed the passages of Great Britain and the United States during last years or those of Germany and Japan at the beginning of 90s, many families can undergo the effects of to have decided to acquire a house. Putting an example illustrative, in Frankfurt the houses are a 44% more sales than in Madrid although the spending power of its inhabitants is superior enough according to data of www.globalpropertyguide.com.
- To acquire a house, is not only to pay the monthly mortgage, but other obligations, the IBI, sweepings collection, Expenses of Community, special taxes by works in the building are acquired… expenses that are not had if it is lived in rent. This supposes that the cost in rent is significantly inferior to the total expenses that supposes to acquire a house. If this additional amount, that exceeds to us by to us to have praised/poured off by the rent we would also save, it we would accumulate a patrimony that in addition would have more liquidity than the acquired house.
 In addition if we needed liquidity by an unforeseen circumstance we would have, it easy with the saving generated by the smaller cost of the rent, but with our house in property it would not be so simple, we would have to sell it and to go of rent to have to us our savings.
- Until the entrance of Spain in the Euro, the inflation was very high reason why the price of the rents raised annually whereas the mortgages did not do it because the quota does not vary with the inflation but with the types of interest. The entrance of Spain in the Euro has done that the inflation becomes moderate, not raising the rents as much.
- Legislative changes are taking place to favor the rent of houses as much to facilitate the evacuation of weak renters, but also in taxation in the PERSONAL INCOME TAX, where a reduction of 50% of the originating yield of the rent of houses already exists (100% if the renter is smaller of 30 years).
- The economic crisis is generating a significant ascent of unemployment reason why we will have to consider all the alternative options outside if we lose our use, being the transfer to another region of Spain or where an important alternative are more opportunities.
- The baby-boom of the years 60s and 70s caused that the demand of houses raised significantly. These new generations had to acquire their house, because when having more than 3 brothers, to the death of their parents had to distribute the house where these resided between several, did not have cover their necessity from a house to the retirement. Nevertheless these new families, now have in many cases two houses, their habitual residence and the one of summering, but with the difference of which they only have one or two children reason why these already are going to have cover the necessity of a house for when they retire they will inherit since it without needing buying an own one.
All these reflections do not have to be understood like an argumentation not to acquire houses, but because no longer it must be a necessity reason why would only have to be acquired if it is a very good investment, something that given the last events does not seem it.
We have developed a simulator in which considering a series of variables to be able to compare the patrimony that we would accumulate acquiring a house by means of mortgage and the one that we would accumulate saving not we spent when living on rent (Simulator Financiers). The result will depend essentially on:
- Ascent of the Price of the buildings, if she is very high will favor the purchasers of houses since besides increasing its yield, the cost of the rent will raise because this it is still a percentage on the value of the house (we recommended to read the article “How much they would have to merit the floors? Differences between Price and Value�). The cost in we have supposed it to rent in a 3.2% of the value of the building according to data for obtained Madrid and Barcelona of www.globalpropertyguide.com.
- Yield that we obtain from the saving of the rent, to greater yield, more we will accumulate. It will depend if we also showed preference for investments of more risk but more awaited yield like the variable rent or investments of very under risk like the national debt. In order to decide that investment to choose we recommended to read the section It invests of this Web.
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