Calculated when it is worth buying your own home and when renting is not profitable

Many agree almost unanimously that real estate is a good investment for the future and that paying off a loan is more efficient than spending money on rent. However, this approach differs from Western countries, so the question arises: why is it so important that Lithuanians have their own home?

Traditions formed by history are corrected by the younger generation

“In terms of the impact on the housing-to-rent ratio, each country has its own story: from state-regulated rents or social housing programs (popular in Germany, where real estate accounts for only 51.5%) to affordability of the dwelling and the specific size of the city, its structure. If you decide to change your workplace in a big city, it is natural to change the location of the dwelling, renting a property is usually more efficient in this case. This is relevant for the people of Great Britain, where real estate assets reach 65.3%, ”says Mantas Mikalauskas, an analyst at real estate Darnu Group, in a press release.

And although 9 out of 10 Lithuanians have their own home, the younger generation is making some adjustments to these statistics. Today, it reflects the profile of the typical buyer, is less attached to permanent life and shares the sharing economy.

“The new generation tends to know the world first and then think about a stable life and start a family, so they are often at a crossroads when considering what to choose: renting a house or owning a house?”, M. Mikalauskas said.

However, a study by Luminor showed that 80% of young people are convinced that the real estate sector is a good investment for the future, and 70 percent. They said they would rather pay off the loan than invest in the rent, with the option of living in a rented apartment today down just 4 percent. surveyed.

“A study carried out by Luminor in the Baltic countries showed that our young people are mature and attached to their homes. Lithuanians are reluctant to deduce when the moment to buy a house is good and when it is bad: we are not waiting for the crisis or the depreciation of real estate. The home is important and meaningful to our people, so we buy it when we need it and don’t wait for some predictions to come true. People see more meaning and benefit in paying a mortgage loan than renting it, and when circumstances change and a bigger house is needed, the first house bought becomes a great investment, ”says Andrius Kvakšys, Product Manager for Mortgage Loans at Luminor Bank.

Why do people rent?

“One of the most important reasons why people take a rental is the need for freedom, flexibility, the opportunity not to get attached to the house and, when circumstances change, to change its location and area. When renting a home, it is not necessary to take care of the maintenance of the property, and even in times of economic difficulties, the consequences of risk are more modest ”, assures M. Mikalauskas.

On the other hand, if previous generations spent most of their life in the same house, young people now usually buy an apartment for 3-5 years and as the family grows, they move to a larger house or even to their own home, according to the survey. the need for a home of their own increases after 26-30 years. Although, according to M. Mikalauskas, today the possibility of movement has become equally relevant for everyone.

“Real estate is liquid. By buying a home, paying off a loan (which is often even lower than the rental price), you not only buy your property, but you also potentially earn from capital gains; In the last 12 months, the prices of residential properties in Vilnius have grown by 4.6 percent, ”said the expert.

What is cheaper?

The decision to buy or rent is generally determined by price. According to the expert, which option is more profitable is determined by the district, the level of installation of the apartment, etc.

To make the analysis as accurate as possible, M. Mikalauskas compared competitive and slightly different apartments in the capital: they applied the same criteria of similar surface to the local city. The comparison included three middle-class projects currently under development in the capital that are attracting buyers’ attention. After evaluating loan offers from three different banks, the average monthly rental price was still 25 to 40 percent. higher than the possible monthly loan payment.

“After buying and installing a new construction, the middle class of 35 to 42 m2 M. meters of housing, could be rented for about € 450-500. Buying a home would cost the cheapest loan, making this option more attractive. However, it is worth noting that in order to obtain a loan, you must accumulate 15 percent. initial rent, and the rented house, unlike your own, does not require additional investments and depreciation or maintenance of the property, ”said M. Mikalauskas.

Needs are determined by both urbanization and quarantine

M. Mikalauskas suggests not considering housing as a sentence for the rest of your life. It is above all capital for the future, a clearly understood and physically tangible investment. If necessary, it will always be possible to sell the house in the future, and if you decide not to live in it, rent it to others. This type of “employed” house is usually less than 40 m2. meters of apartments.

“Most of the buyers of this type of housing are investors. Later, they look to lease the property for long or short-term rental,” said M. Mikalauskas.

According to him, the main influence on the decreasing trend of the housing area was made by the urbanization and the change of attitude, and the functionality of the house became relevant to buyers rather than the amount of square meters.

“Therefore, when looking for a two-bedroom apartment, they preferred to choose 42 m2 instead of 52 m2. Meters – the price of such a property is usually much lower, and the function it performs is basically the same,” says M. Mikalauskas.

Yet in the past six months, the housing market has been mixed with quarantine: As buyers’ needs have changed and jobs have moved from office to home, many have started looking for larger homes. and there is a need to install a separate home office.

“Buyers began to pay more and more attention to patios. Balconies and terraces have already become the norm today, while patios aim to form harmonious and friendly neighborhood communities. On the other hand, as Before, the location of the apartment and the surrounding service offerings are keywords in terms of the buyer’s needs, ”says M. Mikalauskas.