Pros and Cons of Renting in a Falling Market

publication date: Aug 19, 2010
 | 
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books
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Pros and Cons of Renting in a Falling Market - to Rent or Buy?


In today’s market where property prices are being dragged through the media claiming ‘price falls’ are on their way, is it worth continuing to buy or just rent until the property storm clouds have disappeared?

This article by practical property expert Kate Faulkner, Managing Director of Designs on Property looks into the pros and cons of renting a property from 2010 to 2011. 

Quick Checklist to decide to stay renting:-

1.   How long can you rent the property for? Is it the landlord’s home or an investment property?
2.   If you are already renting, what will the costs of renewing your agreement be?
3.   Is there anything that needs doing in the property? Can it be done in return for the renewal?
4.   Will the landlord or letting agent keep your rent the same, or increase?
5.   If renewing the rent, what is the increase in rent?

If you decide to purchase:-

1.   Have you checked you can secure the mortgage you need?
2.   Do you have a big enough deposit to purchase? You are likely to need 10% or more.
3.   Have you enough money to afford the mortgage and maintenance costs/running of the home?
4.   If prices do fall, although you can afford the mortgage, will this cause you stress or worry?
5.   If something goes wrong when you purchase and prices haven’t recovered, do you have a backup plan if you need to move on?

Once you’ve worked through the above, it’s worth thinking about the pros and cons of renting or buying a property in today’s market:-

Pros of Renting versus Buying


1.   If property prices fall, then renting can mean you can buy into the market when prices are low.
2.   Renting before buying allows you to see what it’s like to live in a new area and check out the costs of living prior to buying.
3.   If you are already renting, you may be able to keep your rents low by renewing quickly and securing your rent for the next six to 12 months.
4.   Renting a home before buying can take out the stress of trying to co-ordinate a sale and purchase at the same time.
5.   If you have no home to sell and are a cash buyer, then you might be able to secure a property for less money than anyone else.

Disadvantages of Renting versus Buying


1.   If you are tied into a rental contract and property prices start rising, you may end up having to spend more on a property than if you had initially bought.
2.   Spending money on renting a property and the costs can take away your ability to save for a deposit.
3.   You have the hassle of settling into a home twice, once to rent, once to buy.
4.   Renting a property requires knowledge and experience so you don’t get caught renting from a rogue landlord or one that doesn’t fix things when broken.
5.   Rents continue to rise and you end up paying more on a monthly basis than you would via owning a property with a mortgage.

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