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Renting is more financially worthwhile than owning a property

January 27, 2017 | Landlord News  

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Dr Isaac Tabner, a financial researcher at the University of Stirling has found that many additional expenses are involved with owning a property including building insurance and property maintenance. These costs simply would not affect those renting a property. He says a simple comparison between rent and mortgage costs overlooks these additional hidden costs and can lead to an overestimate of the financial benefits of owning versus renting.

The new research, which is published in the International Review of Financial Analysis, provides a detailed explanation of how costs of renting as opposed to buying a home can be compared, while taking tenants’ and owners’ own personal circumstances and macro-economic conditions into account.

In reviewing transaction costs, rental yields, opportunity costs, inflation and the length of time owning a home, the study also highlights that during periods of deflation or zero inflation people who rent are typically more comfortable financially than homeowners.

Even when economic conditions are favourable, households may need to own their home for between five and 10 years before returns from the rent they are no longer paying are sufficient to compensate for the high transaction costs of buying. However, increases in inflation and rent can tip the balance in favour of ownership.


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“It is often thought that buying a house makes more financial sense in the long run: however, renting is frequently more worthwhile than buying for financially-constrained households, as well as households likely to relocate within 10 years” explains Tabner.

He continues “as well as a reduced ability to recover transaction costs, households relocating within a few years face a higher risk that medium-term prices will move against them, thus reducing or eliminating their equity, while financially-constrained households face much higher mortgage costs.”

Overall, renting a property can save you money in the long term.

Let Leeds has a great range of rental properties. To see our full listing please click here or to find out more call our Professional Team on 01123 320 2000.

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