The constant rising rent prices in Spainwhich marks historical highs in the main Spanish cities, has reopened the debate on whether it is more convenient to buy or rent a home. In fact, The OCU has already spoken about this.
In this context, influential voices in the financial field insist that renting can be, in the long term, a more profitable option, as long as the capital allocated to purchasing a home is invested in other assets such as index funds or rental properties. However, Andrés Millán, lawyer and popularizer (@lawtips), distances himself from this consensus and warns about the risks of this strategy through a video published on his social networks.
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What is more profitable: buy or rent
While influencers and analysts reiterate that you can get higher returns if you decide to invest, for example, 100,000 euros in other assets instead of paying the down payment on a house, Millán exemplifies the theory in the following way: “You could get about 3,000 euros in rent on a house worth one million euros. But with that same million invested in three homes of 330,000 euros you can get 4,500 euros per month in rent.” But he adds: “Great, everything sounds beautiful. Are you really going to do it? Do you have the nerve to invest all your money in an index fund and not touch it for 25 years?” asks the lawyer.
Thus, Milan emphasizes that “this argument only makes sense if you have great financial intelligence or a large asset. But not for the average person”, justifying that, for this “it is necessary that you achieve that profitability that makes renting cheaper than buying for 25 years”, he adds.
Furthermore, he emphasizes that the difference is not only theoretical, but actually practical and psychological, since most people do not apply the logic of potential profitability in their daily lives, due to lack of investment knowledge.
Spanish financial culture goes against investing
Also, another important factor in this sense is the Spanish financial culture, traditionally linked to brick, which does not facilitate the implementation of strategies based on stock market investment.
Although property has remained the main savings asset for households, the difficulty of acquiring a home has intensified in the last decade. Added to this is the limited ability of salaries to keep up with the real estate market, which has a special impact on the new generations.
“Since I know you are not going to do it,” says the lawyer, addressing the millions of users, “unless you are rich or with high financial skills,” he maintains that “buying the house you live in makes sense for most people, because also when you retire and your income decreases, it will be the place where you live while the rents do not stop going up,” he concludes.