Introduction
The age-old debate of buying versus renting a home continues to spark discussions and divide opinions. I thought it would be a good idea to share my perspectives on this argument which may or may not be entirely acceptable to all. It’s important to note that everyone’s circumstances and preferences are unique, so there is no one-size-fits-all answer. However, based on my own experiences and observations, I will share my thoughts on this topic.
Sense of Security and Peace
One undeniable advantage of owning a house is the immense sense of security and peace it brings. When you have a home of your own, you eliminate the uncertainty associated with moving from one rental property to another. Owning a home provides a stable foundation for your life and instils confidence, self-esteem, and motivation to achieve more. While some individuals may have specific circumstances that prevent them from buying a house, I believe that everyone should strive to purchase a home within their means.
In India, the Prime Minister’s Vikas Yojana initiative has facilitated the construction of 1.3 crore affordable houses. These houses have been built by individuals with limited means, proving that the dream of owning a home is attainable for many. While data regarding housing costs in India is limited, we can draw insights from the United States.
For example, a fascinating chart by Visual Capitalist showcasing the cost of buying versus renting in the US over the past 50 years reveals intriguing trends. The blue line represents the cost to buy, while the red line represents the cost to rent.
This data indicates that the cost of renting has steadily increased, while the cost of buying has fluctuated over time.
It is essential to seize opportunities when they present themselves. For example, if buying a home seems financially impractical at a certain time due to soaring prices, opting for a rental may be a wise decision. By closely monitoring market conditions, you can identify windows of opportunity when the cost to buy aligns favourably with your financial situation.
For instance, during the COVID-19 pandemic, housing prices experienced a dip, making it an opportune moment for potential buyers. In the US, prospective homeowners can seize the advantage of locking in 30-year rates, thanks to the global demand for US treasury bonds.
Learning from Global Trends
While it may be tempting to consider the Indian housing market in isolation, it is crucial to recognize that economies worldwide follow similar growth patterns. Although the specifics may vary, the trajectory of urbanisation, rising per capita income, and increased demand for housing is a recurring theme in many countries. As India progresses and matures as an economy, it is reasonable to anticipate a surge in demand for finished housing across the nation. Unfortunately, the supply of housing does not always keep up with this demand, leading to significant disparities between affordable options and market prices. Given these factors, I believe that in the next 5-10 years, housing may become increasingly unaffordable. While this perspective may be biassed, it is important to consider the potential consequences of delayed homeownership.
Should you time the entry ?
Throughout my 28-year career in the markets, I have rarely come across a time when properties were significantly undervalued. Real estate markets often undergo fluctuations, with periods of consolidation followed by sudden drops or spikes. Evaluating market conditions and identifying favourable opportunities is key. For example, the National Capital Region (NCR) market in Delhi has experienced minimal growth over the past decade, making it an attractive prospect for potential buyers. However, as the market enters its next bullish phase, prices are likely to surge, making entry into the market more challenging. Therefore, it is important to keep a close eye on market trends and make informed decisions based on them.
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