maandag 30 december 2013

Would you Rent or Buy a House?

There is a very simple metric to see if it's better to buy or rent a house.

Just look at the price to rent ratio.

Price to Rent Ratio
As you can see, Canada has the highest price to rent ratio in this chart, so it is better to rent than to buy a house in Canada. You can also see that Japanese houses are very cheap, so you could buy a house there. The United States is located on the historical average. My country, Belgium is still very highly priced, so I'm not going to buy a house in Belgium soon. For more charts about Belgium, go here.

An additional aspect to look at is the unemployment rate. Countries with a rising unemployment rate typically have a declining housing price index.

Let's take a few examples: Italy, Netherlands and Spain. All of them have a declining housing price and all of them have a rising unemployment rate. So buying houses when the housing price is going down is not a good idea as the biggest chunk of your money is going into the price asset of your house. Loan rates, maintenance, inflation are all sideshows compared to the price of your house.

Housing Prices

Unemployment Rate
On a final note it is also interesting to look at the amount of building permits that have been issued, if the trend of building permits goes up, the housing prices will go up and vice versa. But that data is difficult to find.

More info here:

1 opmerking:

  1. I really would like to praise you for writing such a fabulous article Thanks for your great information.
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