It depends on the assumptions, and the yearly rise in home prices alone can change the answer. For a home costing 300,000, against renting one like it for 1,200 a month, buying ends 20 years ahead if prices rise 4% a year: 537,912 against 526,572 for renting. If they rise 3% a year, renting ends ahead: 501,973 against 429,339.
Each side is valued at what it would have at the end. The buyer has the home, less the loan still owed and the cost of selling it. The renter invests the cash the buyer pays at the start, then each year adds whatever owning costs more than renting, or takes out the difference when renting costs more. The investments earn an assumed 6% a year.
Four rates of home-price growth
Everything except the yearly rise in home prices is the same in every row:
| Home prices rise each year | Buying ends with | Renting ends with | Ahead at the end | Buying first ahead in year |
|---|---|---|---|---|
| 2% | 339,053 | 479,947 | Renting, by 140,894 | Not within 20 years |
| 3% | 429,339 | 501,973 | Renting, by 72,634 | Not within 20 years |
| 4% | 537,912 | 526,572 | Buying, by 11,340 | 14 |
| 5% | 668,246 | 554,071 | Buying, by 114,175 | 6 |
The assumptions
Buying: a 20% down payment and a loan at 6% a year over 25 years, repaid at 1,546 a month. Property tax and upkeep each cost 1% of the home’s value a year. Buying costs 2% of the price, and selling at the end costs 6% of the value. In the first month, owning costs 2,046 against 1,200 in rent.
Renting: 1,200 a month to start, rising 3% a year. The renter’s investments earn an assumed 6% a year.
What the example leaves out
None of these rates is a forecast. At the end of the first year, renting is ahead at every rate shown: the buyer has paid buying costs and would pay selling costs on leaving. Tax on mortgage interest, rent and investment gains differs from country to country and is left out; so is the cost of moving.