It is the most common case. A 30-year-old couple –the average age at which the Spanish population is emancipated- decides to leave their parental home and go to live in a flat in Barcelona. With a total income of 35,000 euros -the average income per household in Catalonia-, he considers which option will pay a more adjusted fee each month: whether opting for a rental or for a purchase apartment.
In the first place, you will have to bear in mind that you must allocate at most 30% of your income to paying the mortgage or the rent, that is, about 875 euros per month in your case, if you do not want to borrow more than is advisable. Although there are areas where finding a home below this price is feasible, the operation is complicated in large capitals.
Another aspect that the young couple should assess is the sacrifice involved in buying a home compared to paying rent. A question addressed by a recent study by iAhorro, according to which the effort to pay for a mortgage with a repayment term of 24 years and an average fixed interest rate of 2.64%, stands at 26% of the average disposable income -which was 30,552 euros in 2020, the latest data published by the INE-. However, the percentage shoots up 15 points in the case of rent, where the effort involved in paying the installments amounts to 42%. "The prices of new rentals have been rising due to the triggered inflation," they explain from iAhorro, and recall that in six months they have become almost 8% more expensive.
As for the mortgage payments, they stand on average in Spain at 536 euros per month, while those for rent amount to 883 euros, according to the study. However, other relevant aspects must be taken into account before deciding if it is more worthwhile to buy than to rent.
One of them, points out the financial expert of iAhorro Antonio Gallardo, is the previous economic effort required to opt for the purchase since at least 20% of the value of the property must be covered with savings -a percentage that the bank does not usually finance-, as well as the expenses and taxes associated with the sale -around 10%-. Added to this is the difficulty of finding a cheap mortgage at a time when the rise in Euribor is making mortgage credit more expensive, "which will put downward pressure on prices." In fact, they have begun to fall in highly stressed areas such as the Balearic Islands.
In the opposite direction, the limit imposed on the rental price "will also influence rents to rise less", although new contracts can be signed above the 2% ceiling approved by the Government, a limit that will be in force at least until End of the year.
Another important aspect to take into account is that there is great inequality in housing prices by autonomous community and, even in the same community, it can vary significantly. For example, in the province of Barcelona, the average rental price stands at 831 euros while in Lleida it is almost half -443 euros-, according to data from the Department of Housing of the Generalitat referring to the second quarter of the year . The same trend is followed by the purchase of housing: the average square meter in the city of Barcelona is close to 4,000 euros, while in the city of Lleida it is much cheaper, around 1,100 euros.
Therefore, whether buying is cheaper than renting "depends on where you live and when you buy the house," says José García Montalvo, Professor of Economics at Pompeu Fabra University (UPF). Likewise, he explains that it is necessary to know the profitability of the rental, which is calculated taking into account the rental fees and the price of the house. A variable that is usually placed in the environment of 3% and 5%.
To compare, you also have to calculate the cost of buying a home. To do this, you have to add various expenses: mortgage interest, repairs, insurance, taxes, as well as depreciation of the property. Then, you have to subtract from the expenses the expectation of how much the price of the property will increase. “After all, whether it is more profitable to rent or buy in terms of economic effort will depend on the consumer's income, in addition to the place where they do it, although cities that have very expensive housing prices also have a very expensive rent”, comments García Montalvo.
Regarding whether the rise in the Euribor and the consequent greater effort that the consumer will have to make to pay for their home will widen the gap between rent and purchase, the director of the UNESCO Chair in housing at the Rovira i Virgili University (URV), Sergio Nasarre, explains that if inflation rises, so will the rental price since since 1994 the fees are referenced to the CPI, although the measure that forces rent increases to be limited to 2% will remain in force until December.
Does rent suffocate families more? "This has always been the case, except between 2008 and 2011 when the price of rent fell" coinciding with the financial crisis. But why has the price risen since then? "Because we have a poorly developed and poor quality rental system," says the professor. To this is added, according to Nasarre, that in the last decade and a half the purchase of homes has been discouraged, so there are more people who try to rent. And the higher the demand, the higher the price.
The home ownership market will also not be unscathed by the central bank's tightening of monetary policy to fight inflation. The rise in mortgage credit, linked to stricter requirements to access financing, will slow down purchases and, therefore, "more and more people will be left out of the property market," he predicts. And who will buy? "Only those who can assume higher mortgage payments," she replies. "And the funds, which are now the landlords of the poor."
Finally, Nasarre recalls that in the debate on whether buying or renting is more profitable "there is an element that goes beyond the price, which is to patrimonialize", especially if one takes into account the uncertainty that exists around to the future of pensions. A question that young people should not overlook when planning whether it is better to buy or rent.
