How To Make A Gif Like South Park

I buy or rent?

The previous post intended to illustrate the mistake of comparing quota rent. But inevitably triggered the question of what is best for: rent or buy.


One of the reasons why it is difficult to answer this question is that it is poorly formulated. The other, related, is that the answer depends on who ask the question. Are a couple of simple examples.

Case I: Suppose that the question makes someone who already owns their home and have access to a mortgage loan. Following the example of the previous post, and abstracting the risk of property value (which may rise or fall in real terms), your choices are: (i) pay 10% real interest (the monthly fee) for 20 years and receive a perpetuity at 5.5% real (minus taxes and other costs) for rental housing, (ii) invest the monthly amount of the fee (an annuity for 20 years) in any alternative investment.

Case II: If the question makes an owner who also has money to buy another home in cash, now in (i) the buyer receives only the perpetuity (no financial cost), and (ii) the return of alternative investments is now applied to the entire value of the home and not just the value of the share (the annuity becomes an initial investment of all cash available).

Case III: Finally, if the question does someone who does not own, in (i) pay the fee for 20 years, and (ii) pay the rent forever (a perpetuity paying) and invest the difference between tuition and rent on an alternative investment.

As the rates of loans and available to prospective debtor EFFICIENCY different (and even these latter differ among potential borrowers), the result of these comparisons depends on who you ask the question. Vale

final clarification. While for simplicity we ignore variations in the real value of the property, in practice the real estate business depends heavily on the expectation of recovery and actual rates offered by alternative financial investments.

In Argentina, low rates (along with the concentration of agricultural income and some speculative capital flow) fed the real estate investment in self-funded products demanded by sector (case II), and expectations of future recovery, generating a cycle ("virtuous?) that has inflated the prices of these properties, shifting the spillover pricing.

more simple: the demand for high-priced areas has raised the prices of surrounding areas, making it more difficult access to cases I and III, in a sort of Dutch disease real estate, to which we return in a future post.