To Buy or Not to Buy: Which Works for You?

Recently, there has been an upward trend in renting in Pakistan – with a substantial increase in house for rent in Karachi – either due to people’s personal choice or because of volatile market conditions. However, regardless of current trends, both renters and buyers continue to face a number of challenges when looking for a place to call home. It is a big decision that can only be made after assessing the costs and benefits of both houses and rental units. Home ownership may not be for everyone, while renting might not be as straightforward a process as it seems. 

While there is no right answer to this, you can make the correct decision that aligns with your lifestyle, finances and goals. Graana.com has made a case for each to make it easier for you to decide.

The Case for Renting 

Renting can be the smarter choice for some people due to a number of factors:

1. Changing home values

Owning a real estate property was a more important goal for the previous generations. In fact, our culture still values home ownership as a significant indicator of financial stability. However, values have evolved now; millennials, the biggest target market for real estate at the moment, prefer saving up for other high-priority items like cars, studying abroad, vacations etc. They prefer a flexible lifestyle where they have the liberty to move wherever and whenever instead of being tied down and restricted to one specific location.

1. Maintenance and repairs 

The ancillary costs, time and effort that come with owning a home cannot be ignored. One would have to commit to seasonal maintenance and constantly check and pay for repairs. In the case of a rental place, on the other hand, the landlord assumes full responsibility for maintenance costs, like leaky faucets or broken washing machines. You would not have to involve yourself in time-consuming home improvement projects (you may not even have the aptitude for them in the first place). 

1. Home ownership comes at a heftier price tag
   

Buying a property is a huge investment, especially in the seller’s market of today – it comes at a heavy cost, both upfront and in the long term. You may not be able to sell your property when you want and even if you do, it may not be at the desired price. Even if you take up renovation projects, they may not always increase the value of your home. The reasons that affected your decision to purchase a house in the first place – like favourable economical, social or environmental factors – are also ever-changing and may drastically change the overall value of your house if and when you decide to sell it. 

If you are renting, you just have to pay a one-time cost of the security deposit, which will be returned to you when you move out (as long as they haven’t caused any damage to the property). You are not liable to pay any property taxes either. If you are living in an apartment, the monthly utility bills of the building are often lower and more predictable, which makes it easier to allocate it in your budget. 

For people with low and unstable incomes especially, it is less risky to rent out a place instead of pouring all their limited resources into the purchase of a property.

While it is true that rent increases are getting steeper with each passing year, this may not always be the case for every area. Each city has its rent control laws to protect tenants from unfair rent charges. For instance, rental prices were causing issues for residents living in Islamabad, a city that already had a higher cost for living. As a consequence, the Rent Restriction Amendment Bill was passed in the capital in 2020 to provide a legal cover to the tenants. 

1. More room for adjustability

It is a gamble to assume that you would want to continue living in the same place for a long period of time. Renting gives you a chance to move out anytime to a different property in a different area altogether if the current place does not suit you. 

1. The right space for you

People usually spend a long time (practically years) to search and buy a house, but make quick decisions when they have to look for a rental. If you research thoroughly enough and negotiate with the landlord, you can find a place that can get you the most for your money. 

The Case for Buying

Homeownership can be a worthwhile investment for years to come for a number of reasons:

1. It is becoming a less convoluted process

Despite common perception, buying a house is becoming more and more convenient. The Naya Pakistan Housing Scheme, for example, is a government initiative that has brought about an improvement in mortgage policies in Pakistan. Many banking rules and policies have been relaxed so as to make it more probable for low-income families to procure home loans.

1. Stable housing payments 

For a rental unit, even though you only have a single upfront cost of the security deposit, it is still a large payment. In many cases, the landlord also creates difficulties in giving back the final and exact total amount when you leave. 

When you own a house, you are aware of the fixed-rate mortgage loan for your property, so you know exactly how much you have to save for the principal and interest payments. This long-term predictability can cultivate financial stability over the long run. If your income increases during the loan’s lifetime, the proportion of your debt will only relatively decrease over time. 

1. Building wealth through home equity

You may have to pay your mortgage lender every month but that cash makes its way back to you in the form of equity when your property’s market value appreciates over time.

1. You are not answerable to anyone

In the case of renting, you don’t have a stake in your residence so you are always at the whim of your landlord and the rental market. For example, if your landlord abruptly decides to sell his/her property, you would be forced to uproot your life and move out somewhere else. If the landlord is responsible for regular upkeep, it still may not be as quickly and as you may prefer. 

When you have full legal rights to an asset, there are a number of intangible benefits involved, like the sense and pride of ownership and stability. The decision-making only lies with you. There are no limitations imposed on you from an external party as the surrounding four walls are entirely your own. For example, you wouldn’t have to make do with a rental’s outdated interiors and can give your house a makeover according to your taste. 

1. Being part of a community

Only home ownership can give you the opportunity to build your roots and connect with people in your community for the long term. 

1. More stability for children
   

People with kids generally prefer a more permanent place where they can be raised. They wouldn’t have to face any pressure of changing their schools just because their landlord didn’t renew their lease. It would also build a healthy environment for children to get involved with the local community and not deal with the stress of moving and leaving their friends/peers behind.

Is it better to rent or buy a house? Only you can answer that – after asking yourself these questions:

1. How is your financial discipline? Do you have solid savings? What is your debt-to-income ratio?
2. Do you have a steady job?
3. Are you prepared for a long-term investment?
4. How long are you planning to stay? (If the estimated time period is anything less than 3-5 years, renting would be a more feasible choice.)
5. Do you want a stable or a flexible lifestyle?
6. Is owning a home in the neighbourhood you prefer affordable for you, or will you need to stick to a tight budget?
7. What are your family and career goals? For instance, are you planning to expand your family? Are you expecting to be relocated for work sometime in the future?
   
8. Are you expecting any huge changes in your life anytime soon?

If you are new to a neighbourhood and are not entirely confident in your decision yet, renting for a period of time in that area will give you the opportunity to test it out before committing to buying a property there.  

The real estate market is tricky to navigate. If it continues to be a seller’s market, homebuyers may have the potential to make big gains, but if the prices plummet, they may lose out. The key to making your choice is by evaluating your lifestyle first and how it may change in the future, so that you don’t outgrow your property too soon. 

It is recommended to hire a reputable real estate agent, like Graana.com, which can help you weigh your options and choose the best fit for you.