Buy or rent: the assumptions that can reverse the result
Which inputs can turn a calculated buying advantage into a disadvantage?
A loan payment is not entirely a housing expense, because principal repayment builds wealth. Conversely, a property’s value is not all your own wealth while debt remains. A useful comparison carries both housing options to the same date and accounts for the values left over.
Account for both sides of the balance sheet
The buying side includes property value less outstanding debt and any additional invested surplus. The renting side includes capital not committed to a purchase and invested differences in ongoing spending. Purchase costs, owner costs that cannot be passed on and maintenance are separate items. Rent excluding utilities and the loan payment alone do not capture this balance sheet.
Appreciation can dominate the comparison
Purely illustrative assumptions: a property costs €400,000. At 0% annual appreciation, its modelled value after 20 years remains €400,000. At a constant 2%, it becomes €594,378.96. The €194,378.96 difference comes from one assumption, not from paying off debt. Selling expenses and possible taxes are not deducted in this isolated valuation example.
Treat debt and the alternative investment consistently
A €400,000 property with €250,000 of debt initially represents €150,000 of tied-up net wealth. Do not compare that with a renter’s account that omits the original available capital. Ongoing savings must also be invested by the same rule on both sides; otherwise the model favours one option through its accounting alone.
Change one assumption at a time
Start with a scenario without property appreciation. Then change value growth, rent increases, investment returns and owner costs one at a time. If small plausible changes reverse the ranking, a single break-even date is not robust. Refinancing at a different rate may require extra scenarios; constant calculation rates do not predict the terms of that future loan.
Affordability needs a separate assessment
A modelled final-wealth advantage does not help if ongoing payments or a major repair are unaffordable. Assess reserves, expected occupancy and flexibility to move separately. The existing property comparison uses German purchase costs and regional tax references; its outputs cannot be transferred unchanged to a purchase in another country. For actual consumer-loan offers, compare the APR including costs prescribed by section 16 PAngV alongside the model’s nominal borrowing rate.
The more robust decision does not depend on one optimistic assumption. Compare complete final wealth and ongoing affordability; a model cannot decide personal housing preferences in euros.