"it is now much cheaper to rent than to buy a house in many countries"

 

According to our latest house-price indicators, it is now much cheaper to
rent than to buy a house in many countries


...house prices are at record levels in relation to rents (ie, yields are at
record lows) in America, Britain, Australia, New Zealand, France, Spain, the
Netherlands, Ireland and Belgium. America's ratio of prices to rents is 32%
above its average level during 1975-2000.

www.passpoirt.net

  It's somewhat different here.  Prices for existing houses in the
slow-growth part of the midwest have not kept pace with inflation.  I
looked up sale prices of 3 houses I owned in the past , one had
increased at a compound rate of 1.6%, one was about 2, and one was 2.8.
 These are not in slum areas or out in the hinterlands.

So if you buy a house for a sale price of 100,000 here and hold it for
10 years, and it only goes up 2% per year,  just compounding the 2%,
the sale price would be 121,899.  Assuming for simplicity you sell it
at 121,899 and subtract the cost to sell the place (7% realtor
commission here plus a percent to close), the net would be 112,147 (92%
of 121,899). Ten years of appreciation gets you 12 grand, which is not
enough to keep up with inflation *and* out of that you have to take out
maintenance.  Something like 40-50% of houses will need a new roof
during a 10 year period.

So in some areas a house is simply a hedge against inflation, plus if
you stay put it's cheaper than renting, and you can deduct interest and
property taxes if you itemize.  Contrast that to Boston or CA where you
can count on what, a 10 percent bump per year ?