Rental of housing vs Buying of housing: not only financial choice, but lifestyle choice
The myth of “buying a house without loss” has been dashed after the real estate market entered the stock age. The central logic now lies in choosing “the leverage of assets and the sense of settlement brought about by the property” or “the freedom of cash flow and the return of opportunity costs brought about by the rental of the house”.
1. Core logic of the calculation model
Our calculator usesNet asset comparison method：
- Roads to purchase houses: Suppose you paid the down payment and carried the loan. After a year, your wealth = the market valuation of the house at that time (considering the rise and fall) - the balance of the loan that was still due to the bank.
- Rental route: Suppose you didn't buy a house. You can invest in the whole of your down payment. At the same time, if the “rental” per month is lower than the “prime loan” originally payable, the difference saved will be set. After N, your wealth = the compound end of these two investments.
2. Key variables influencing conclusions
Annual increase in house prices: That is the most important parameter. With a three-fold leverage on the purchase of the house, the absolute value added can often crush the management of the property if the price increases slightly. But if the house price goes down or the lever will consume your principal.
Rate of return on investment: If you have the ability to invest in a high amount of money (e.g. 8% +), the compounding of renting money will have a spectacular explosive effect in 20 years.
Rental ratio: The current low ratio of rents to sales in urban areas in line 1 and 2 (1-2 per cent) means that rental housing can significantly reduce the pressure on living and improve the quality of life in the short term.
3. Balance-taking of psychological and social factors
Rational math is just a reference. In making decisions, you also need to consider:
- Educational resources: In some areas, home purchases are still the building blocks for access to quality public education.
- Liquidity: Cash management is readily available, property transactions are long-term and tax-intensive.
- Happiness: Many people buy houses to gain a sense of dignity and belonging “not to be evicted by landlords”.