Houses and apartments: should you buy or rent?

Buying or renting – this decision depends on many factors. Affordability, life planning and potential risks need to be analysed. Our guide can help you decide.

Anyone planning to buy a house or condominium apartment is well advised to consider various scenarios in advance. Ultimately, purchasing property can often be a life-changing decision.

Financing: This is how the maximum purchase price is calculated.

You will only be able to purchase an apartment or house if your financial situation permits it. For an initial evaluation, here are some rules of thumb on financing which will help you to determine the affordability of a property purchase.

• Your own funds: as a rule, you will need to cover 20 per cent of the purchase price from your own funds. Your own funds may include savings, cash and loans from the 2nd and 3rd pillars, loans from family members and acquaintances, as well as gifts and advances against inheritance. 80% of the purchase price will then be covered by a mortgage loan.
• Affordability: the following rule of thumb can help you determine whether the property will be affordable for you after the purchase. The annual cost of your home should not exceed 33% of your gross income. This cost consists of mortgage interest, any amortization, maintenance costs and reserves. This sum is usually equal to around 6 per cent of the purchase price.
• Use the following formula: divide your gross income by 3, then divide the result by 6, then multiply this number by 100. This is your maximum affordable property price.

Once the fundamental questions of financing are answered, it is important to start thinking about other important factors.

Buying a house or apartment: the advantages & disadvantages

Buying a property: The advantages

• If you pay off the mortgage, your housing costs will sink over time. This is an especially important factor after retirement.
• When interest rates are low, owning a home is generally cheaper than renting.
• Renovations and embellishments generate added value that pays for itself when you sell your home.
• You can adapt your apartment or house to suit your personal taste.
• Properties are usually a sound financial investment.
• As the owner, your housing situation is more secure since no landlord can evict you.

Buying a property: the disadvantages

• Home buying is usually a long-term decision. You have less flexibility when changing jobs or for other changes in your personal circumstances, such as divorce or retirement.
• The follow-up financing can mean an additional burden. For example, the possibility of mortgage interest rates rising must be taken into account when buying a property.
• The money invested in your home is tied up and thus not available.
• Owning your home means you must foot the bill for any minor damage and maintenance.

Summary: If you are in a position to commit yourself for the longer term, value the freedom of owning your home, want lower living costs in retirement and wish to invest your money safely, then the purchase of a property is worth considering.

Renting a house or apartment: the advantages & disadvantages

Renting property: the advantages

• You can respond quickly if your personal circumstances change. In the event of divorce, unemployment or retirement, you can search for an apartment for rent.
• You are more flexible: when changing jobs, you are not tied to a particular location.
• Even long stays abroad are not a problem.
• You have less to worry about – you can simply report any faults to the management company and they will take care of it.
• If you dislike your neighbours, you can simply move somewhere else.

Renting a property: the disadvantages

• Any renovations or alterations to the apartment must usually be removed before you move out.
• You have less freedom in the use of the property.
• The money you spend on rent is lost; it accrues no interest and does not generate capital appreciation.
• You have less freedom in the use of the property.
• If the landlord needs to use the apartment, you will have to move out.