Owning a house is everyone’s ultimate dream, but it is not affordable for all, especially in low-income countries like Pakistan. A minimum standard 30% down payment and different tax slips and clearances are required, making the choice difficult for middle-class families. Renting a house is an affordable choice with lower upfront costs and expenses. Although the real estate market in Pakistan is projected to reach a value of US$2.08tn in 2025, with residential real estate taking the lead, consider your priorities, future plans, job security, and personal goals while deciding between buying or renting a house.
Buying Vs. Renting a House- What’s More Sensible
According to research, housing prices in Pakistan have gone up by over 135% in the past five years, while rental property comes with little to no security and guaranteed maintenance. So, the decision to choose between buying and renting a property can get vague.
Below are a few aspects and the pros and cons of owning and renting a property to ease your decision-making process.
| Aspect | Buying a Home | Renting a Home |
| Financial Investment | – Pros: Builds equity over time; potential for property value appreciation. – Cons: Requires significant upfront costs (down payment, closing fees); ongoing expenses like property taxes and maintenance. | – Pros: Lower initial costs; no responsibility for property maintenance or repairs. – Cons: No equity building; subject to rent increases over time. |
| Flexibility and Mobility | – Pros: Stability and control over the environment; freedom to renovate or reconstruct a property. – Cons: Less flexibility to relocate; selling a property can be time-consuming and market-dependent. | – Pros: Greater flexibility to relocate; easier to adapt to changing circumstances or job locations. – Cons: Risk of instability if the landlord decides to sell or not renew the lease. |
| Monthly Expenses | – Pros: Potential for predictable monthly payments, especially with a fixed-rate mortgage. – Cons: Additional costs for maintenance, repairs, insurance, and property taxes. | – Pros: Typically includes predictable monthly rent without additional maintenance costs. – Cons: Rent payments may increase with each lease renewal; no control over future housing costs. |
| Responsibility and Maintenance | – Pros: Full control over property decisions and improvements. – Cons: Responsible for all maintenance, repairs, and associated costs. | – Pros: Landlord typically handles maintenance and repair issues. – Cons: Limited or no control over how and when repairs are made; must adhere to landlord’s rules and restrictions. |
| Tax Implications | – Pros: Potential tax benefits, such as deductions for mortgage interest and property taxes. – Cons: Tax benefits may vary based on location and individual circumstances. | – Pros: Generally, no property-related taxes to pay. – Cons: No tax benefits related to property ownership. |
Factors Affecting Buying & Renting a Property Decision
To make a wise once-in-a-lifetime decision, jot down all the factors that could play a decisive role. There must be no hassle your way when you make such an important decision for your present and future. Skim through the major factors to consider when deciding on the best possible way of getting a residential property for yourself and your family.
Upfront Costs
Buying a home requires a down payment, typically 5% to 20% of the purchase price, plus closing costs, which range from 2% to 5%. Renters, on the other hand, enjoy little to no upfront expenses. They just need a security deposit to pay the real estate company they hire along with the first month’s rent. So, if you are planning to keep your savings liquid, renting is your cup of tea.
Monthly Expenses
Owning a home doesn’t make you spare anything notable every month except for the maintenance cost, if any. Rental property owners need to spare rent costs every month while planning the budget. This can lead to continuous distress especially for the salaried class.
So, if you don’t have any promising source of income and the outcomes are unexpected, it’s better to avoid renting a property.
| THE GOLDEN 50/30/20 RULE One of the effective strategies to logically channel your monthly income is to follow this 50/30/20 rule. Keep 50% of your earnings to pay the rent, bills, transport, and other necessities. Next 30% can be invested in shopping and not so basic needs. The final 20% can be kept in your savings account or invested. |
Long-Term Financial Impact
Homeownership builds equity over time, and property appreciation can increase wealth. Tax deductions on mortgage interest and property taxes offer additional financial benefits. However, decreasing home values can put homeowners at risk of owing more than their house is worth. Renting doesn’t build equity, but it avoids depreciation risks and selling costs like agent commissions and closing fees.
Maintenance and Responsibilities
Homeowners handle all maintenance, from routine upkeep to major repairs. Unexpected costs, like a broken water heater, can be expensive. Renters, however, rely on landlords for repairs, reducing both financial and time commitments.
The key here can be to hire the best real estate developer in the town who can invest his soul and blood to make you choose a reasonable tenant who will help you manage your problems.
Stability vs. Flexibility
Owning a home provides stability, allowing residents to establish roots and customize their space. It also shields them from rent hikes. However, selling a home takes time and involves costs, making relocation difficult. Renting offers more flexibility, making it ideal for those who expect job changes or want to explore different areas.
Market Conditions and Interest Rates
Different factors like house prices, rental costs, and interest rates influence whether buying or renting makes more sense. In areas where mortgage payments match rent, buying can be a smart investment. High interest rates make buying more expensive, while competitive rental markets can drive up rent prices.
So, Buying Vs. Renting- Which One Takes the Lead?
Buying a residential property suits those with huge amounts in hand and long-term plans who can manage maintenance costs. Renting works better for those who value flexibility or have a monthly income plan. It is important to avoid a few mistakes to avoid when buying a property like insufficient search, making spontaneous plans, not conducting a property inspection etc. It is recommended to consult a professional real estate agent to make a futuristic decision. Also, consider your family preferences, lifestyle, and future plans while making this important decision.
Decision Summary
- Buy a Home If:
✅ You have stable income and savings for a down payment.
✅ You plan to stay in the home for at least 5-7 years.
✅ You want to build equity and invest in property.
✅ You can afford maintenance and unexpected repairs. - Rent a Home If:
✅ You need flexibility for career or personal reasons.
✅ You don’t want to handle maintenance costs.
✅ You’re unsure about long-term financial stability.
✅ Home prices and interest rates are too high.