Home ownership necessitates some hard financial decisions: raising deposits, paying a mortgage loan, and the cost of long-term upkeep. However, potential homeowners shouldn’t neglect the emotional aspects of the buy-versus-rent decision. An important element – but not the only one – is a choice between freedom and roots.
Home ownership is the norm across much of Europe – around two-thirds of EU citizens own their own home. It is seen as both a sound investment and a long-term aspiration, a signifier of maturity, security and success. But is this the right way to look at it? Should potential homeowners be looking harder at their own motivation before taking a decision?
An important argument that persuades some people to eschew home ownership or at least delay it is about freedom. Renting gives you freedom of movement. It allows you to pack up and go at a moment’s notice, or near enough. This gives you the flexibility to take advantage of career opportunities whenever and wherever they arise. You can move between regions, or to other countries, which may be a defining choice. Having this flexibility may also put you in a better position to manage short-term difficulties, such as redundancy, or boost your career prospects.
Exploring new areas
Renting also allows you to try out living in different areas and different types of accommodation. You can choose urban or suburban, apartment living or a traditional house, spacious gardens or a balcony with a view. If ultimately you do decide to buy, you may have a better sense of your preferences and make better decisions as a result.
Avoiding or postponing home ownership can also provide freedom of capital. Homes tie up large amounts of money, resources that are difficult – though not necessarily impossible – to access. They take time to buy and sell, and are therefore not a readily available source of funds if you need liquidity urgently. They require maintenance and repairs; some homeowners are only one leaky roof away from financial disaster.
By choosing not to buy a home, you could deploy your capital on other projects, investments or passions – starting a business, for example, or collecting art or wine. These might prove just as financially beneficial as buying your own home, perhaps more so, and could also give you more pleasure.
Freedom from anxiety
You could even focus on investing in yourself. This might involve further education, retraining or a redirection of your existing career. If you are renting, it is far easier to take time out to make changes in your life. This potential return on investment is rarely quantified as part of most people’s rent-versus-buy calculations.
For many renters, freedom from worry is the greatest benefit. Houses are a responsibility – they come with bills that need to be paid. They need to be maintained and their value preserved. That’s fine when house prices are rising and the market is buoyant. However, if the market slows, or you make the wrong choice of property, a house can feel like a ball and chain. As a renter, if the roof leaks, you call the landlord, and the job is done (hopefully). Homeowners, in contrast, bear the cost and the commitment.
The case for home ownership
For people in many countries, the case for home ownership has in recent years often been led by financial considerations. Residential property has been a sound investment for many years, especially in Luxembourg’s buoyant property market. However, future house price growth is not guaranteed: what can home ownership offer beyond the financial considerations?
For many people, owning your own residence is a way of putting down roots. It entails settling down, finding an area and a community where you feel comfortable and creating a home. This is a powerful emotional driver for many people. It is not impossible to achieve the same through renting, but it’s rarely quite the same.
There is also the idea that it is yours. You can paint the ceilings pink if you choose. No-one will ask you about your choice of wallpaper. Again, this might be possible in a rental property, but often you will not have the same freedom. With ownership, there is the sense that you are creating a permanent home, a place for your family to grow up and begin their lives.
A store of value
A home you own is more than just a place to live – it is also an asset that possesses and retains value, whether or not its price appreciates. By contrast, the freedom and flexibility offered by renting comes at a significant cost. Payments on mortgage loans increase the net value you possess in the property, but monthly rental payments are a continuing expense that will not be recouped.
And creating a home for your family in a property one owns also represents something your children are likely to inherit in time, or some or all of its accumulated value. They will have to make their own choices about how much importance they place on freedom of action, but the savings represented by a house or apartment can be an important tool to provide financial help as they start to make their way in the world.
The right choice will depend on your personal hopes and ambitions, and vision of your family’s future. Homes are expensive – they represent a major financial commitment that will influence other decisions you make. For many people, this is a price worth paying for the security and stability, emotional as well as financial, that a home can provide.
Home buying does involve sacrificing some aspects of freedom – of movement, of capital and from stress – and it will not be the right choice for everyone, particularly in the early years of adulthood. You need to decide whether freedom, roots or other considerations are more important to you – knowing that your priorities may well change over the years.
Houses are a responsibility that come with bills that need to be paid, that need to be maintained and their value preserved.