When Mick Jones of The Clash sang these lines, he followed them with the assertion: ‘If I go there will be trouble, if I stay it will be double’, which pretty conclusively answers the question. Who wants double the trouble? 

But when we ask this question about the timeless debate as to whether to rent or buy, the arguments for and against are rather more balanced.

Traditions and reality 

There is a strong tradition in the UK of aspiring to home ownership. Only 19% of the population rent in the private sector [1]. This contrasts with many other leading western nations.

In Sweden 35% of the population rent their homes, while in France it is 36% and in Germany the figure is over 48% [2] while in the world’s largest economy, the USA, 36% live in rented accommodation [3].

The balance was not always so heavily towards home ownership but in the closing years of the 20th century a combination of government stimulus and the recognition of property as an asset that would increase in value shifted that balance. 

Today, there is a widespread view that buying is an investment and renting is a waste of money, that buying is for those who can afford it and renting is for those who cannot. 

But is it this simple?

Owning your home 

It’s certainly true that it is very hard today to get a foot onto the property ladder, that is, buying a first home that will allow you to scale up in the future. 

House prices have risen far faster than wages for decades, the virtual free-for-all that was the mortgage market 30 years ago has ended and zero deposit mortgages are mostly a memory. 

In 1997 the proportion of people aged 25-34 who owned their home was 55%. In the past 25 years this has fallen to 34%. [4] This is not through choice but because of economic circumstances.

There are many things in favour of home ownership. You have the security of a home from which no one can evict you, provided that you make your mortgage payments. Subject to planning laws you can do what you wish with it. 

Once your mortgage loan is paid off you own the property outright. It will probably be the most valuable single asset you ever own and if you sell it and downsize you’ll liberate a lot of money.

But there are negatives too.

For one thing, the security of home ownership is something of an illusion. You are at the mercy of financial factors including interest rates (which are rising at an alarming rate) versus your own income which, according to The Deloitte Consumer Tracker, confidence in consumers disposable income, has fallen to -49%.

The 1970s ended with interest rates at 17% and although they fell to 9% in 1982 they were up to nearly 15% in 1989. 

Interest rates have been microscopically low for the last 15 years which has kept mortgage repayments manageable, but that will not last forever as is already being seen with rates being raised 4 times since December now at 1.00% and rising [Source: The Times].

Many homeowners would struggle to meet repayments of those conditions returned and then their security could disappear in the time it takes their lender to start repossession proceedings.

Buying a home can put a huge strain on your finances – there is the substantial deposit to find or save for, legal fees and stamp duty. Then there are the costs of ongoing maintenance, none of which can be passed on to a landlord. 

Moving on is not straightforward either, because it can take many months to find a buyer and conclude a contract of sale. Sometimes owning your home can be a hindrance to your flexibility.

Renting your home 

It’s true that when you rent, you’ll never see a return on your money, but there are numerous advantages that are too often overlooked in this debate. Many of these come down to the great freedom and speed that renting affords. 

A short-term tenancy of only six months is a minor commitment if you’re someone who is likely to be moving on. Short-term agreements can in any case automatically become periodic tenancies which will continue until either you or the landlord gives notice – one month from the tenant and two months from the landlord.

As a tenant, you won’t have to worry about the cost of maintenance, such as replacing a boiler, which can cost upwards of £3,000 and you won’t need to buy any expensive white goods. 

There are no legal fees or stamp duty and any deposit is limited to the equivalent of 5 weeks’ rent whereas when you buy you will probably have to put down 10% of the asking price. 

On a £300,000 house that’s £30,000.

Entering the rental market is much easier and quicker than getting on the property ladder.

You don’t have to worry about interest rates or a fall in property prices. It’s ideal if you’re in the early stages of a serious relationship and you want to live with your partner but not get tied into financial commitments.

And if your lifestyle and career mean you could be moving around a lot, then renting is clearly an easier option.

At Inventory Base we are in contact with agents, landlords and tenants constantly. We listen to what they have to say about the rental experience and we continue to learn a great deal from the conversations.

Although renting is not as popular in the UK as in many comparable countries, it has been steadily growing as the prospect of home ownership has become a little more distant. 

There is no single motivation that keeps people in the rental market. Many will be perfectly content to rent throughout their lives, enjoying the lack of responsibility and the freedom to up sticks whenever they wish. 

Others will see it as a temporary situation and will budget carefully while renting to save for a deposit, so they can buy in perhaps 5 or even 10 years.

Should I rent or should I buy?

There is no right answer and no typical renter.

As the number of households occupied by private renters in England increases from 2m in 2000 to 4.43m in 2021 (social renters are just under 4m [source: Statista] either choice is entirely legitimate and the private rental sector is set to remain an option for the foreseeable future.

Resources:

[1] English Housing Survey Private rented sector, 2019-20

[2] Eurostat

[3] Pew Research Centre

[4] The Institute for Fiscal Studies