the cash? Time to buy
Plus, 18 December 2009
Is it better to buy or to rent a home? The current limited availability
of financing along with the relative stability of property prices are
making the decision much easier than in the past.
Buying appears particularly attractive for those who have access to
bank loans, since they can take advantage of the low interest rates
that are unlikely to decline any further from the present historical
Additionally, even though prices may fall marginally lower than the
current levels, the gain may be offset by a rise in the cost of money
in the meantime. The benefit of a 1 percent drop in price will be surpassed
by a likely rise in interest rates.
One category of prospective buyers is those that can finance a house
purchase themselves. Their case is rather complicated: On one hand,
the availability of cash makes borrowing easier - as banks rarely lend
the full amount - but, on the other, this also means they have time
to realize a purchase in the near future.
The prospect of the government introducing much stricter changes to
the general taxation framework - particularly as regards proof of the
sources of cash used for purchases - provides a strong argument for
many considering a purchase soon, as the changes will have no retroactive
The renting solution appears more realistic for those who do not have
enough cash to finance at least part of a purchase - which is usually
around 25 percent of the price. Besides, income insecurity is now greater