Is it good to buy or rent a home
The biggest financial decision in everyone’s life is purchasing a home. Home ownership is now 75% in Pakistan, whereas it was 85% in 2000. Home ownership is declining due to the rising property prices in Pakistan. From 2000 to 2015, Pakistan witnessed two real estate property booms. First property boom was from 2003 to 2005 and second property boom was from 2010 to 2013. These property booms increased the property prices by ten times in Pakistan. Due to the constant increase in Pakistan property prices, home ownership is declining in Pakistan, but on the other hand numbers of people on rents are increasing. Pakistanis are so squeezed by high home prices and unaffordable rents that they are now forced to think about better financial option. According to one group renting a home is better financial decision, whereas other group favors buying home. Lets discuss what is better, buy or rent a home?
Buying a home in Pakistan
Benefits of buying a home in Pakistan:
Buying a home in Pakistan has many benefits. First one is the peace of mind and security, as no one can force you to move out of the house. Second benefit of owning a home is that you can renovate home according to your will. Third benefit of buying a home is the life time investment opportunity, as your money is hedged against inflation and you enjoy the perk of constantly increasing property prices in Pakistan.
Costs of buying a home in Pakistan:
There are many costs that home owners pay in Pakistan. First one is the initial cost you pay while buying a home. This is the total agreed price of home. Second cost is the commission of real estate agent which is normally 1% of the total house price. Third cost is the yearly property tax in Pakistan. Property tax varies according to the size of home in Pakistan. Fourth cost is the renovation cost, which you pay whenever you need to upgrade your home.
Renting a home in Pakistan
Benefits of renting a home in Pakistan:
Renting a home in Pakistan provides many benefits. First benefit is the flexibility to move. Renters can easily shift to other cities or towns that are near to their work places. Second benefit of renting a home is the choice to change homes according to your requirements. For example if you are living in a 2 bedroom home, you can easily rent another 3 bedroom or 1 bedroom home according to your requirements. Third benefit of renting a home is that if rents are not affordable, you can easily find another home which has less monthly rent payment. Fourth benefit of renting a home is that you don’t need to pay for home up-gradation, as renovation is done by home owner.
Costs of renting a home in Pakistan:
There are many renting costs in Pakistan. First one is the advance you pay to the owner, which is normally two months’ rent in advance. Second cost is the commission of real estate agent which is normally equal to 50% of one month’s rent. Third cost is the monthly rent you have to pay. Fourth cost is the yearly rent increase which is normally 10%. Fifth cost you pay when you leave home. This is the amount you pay for any damages to the property that happens during your stay as a tenant.
Buy or rent a home / Renting is best for short term financial gains, but buying is best for long term financial gains
From the above discussion, it is clear that buying or renting a home has own advantages in Pakistan. In short term financial gains, renting a home is more cost effective than buying a home. But in long term financial gains, buying a home is better than renting, as prices have always increased in Pakistan whatever time period we compare. Choice of buying or renting a home at the end depends on the financial situation of individuals. If individuals have less money, they can go for renting. But if they can afford, buying a home is best as it offers the best investment opportunity in Pakistan.