Hello...
I agree that renting is not owning. This has many
implications.
If we talk about this point, we can talk about the long term/ short
term financial effects, the psychology (some people don't like to
own, but move about, vice versa), etc.
For me I look at the opportunity cost, financially. In Singapore,
ownership needs Down Payment. Usually not less than tens of
thousands, and can be much more. If this money can be put to work
elsewhere, this means u have incurred an opportunity cost.
If this opportunity cost is bigger than the actual benefits of
ownership (financial or otherwise, because ur opportunity cost also
has non-financial implications), then renting is better. And vice
versa.
The thing is, everyone's opportunity cost is 'different'. If u have
more opportunities, ur cost is bigger.
For example, let's say ur Down Payment is 60k. If u have an
opportunity to invest with a modest 20% annual return, if u pay 60k
for Down Payment:
- After 1 year u would have forgone 12k. (72k-60k)
- 2 years, 26.4k (86.4k-60k)
- 3 yrs, 43.7k
- 4 yrs, 64.4k
If u have an opportunity to invest with 100% return, ur opportunity
cost:
- 1 year, 60k
- 2 yrs, 180k
- 3 yrs, 420k
- 4 yrs, 900k
More opportunities will cost u more.
If u have the opportunity to invest in deposits and savings only,
ur cost is much lower.
People think about the financials and calculate, but they shouldn't
forget that opportunity cost is a real cost and should be included
in their calculations too.
