AS the real estate market continues to evolve at break-neck pace, one age-old question remains at the forefront of financial decisions: Buy or rent? As prospective homeowners and renters weigh their options, the advice from industry insiders is clear: Buying a house can be a savvy investment and a strategic move towards securing your future.
Despite the fierce competition between rent prices and mortgage rates, experts argue that the benefits of homeownership far outweigh those of renting.
"When you own your home, you're able to build wealth. How? Appreciation in the price of the property," said Keisha Bailey, CEO of Profit Jumpstarter, a wealth coaching and financial education company.
The financial expert, investment educator and entrepreneur shared with the Jamaica Observer that owning a house brings more financial benefits than one may think, including the opportunity to potentially be a landlord. While it has been said many times before that houses appreciate, Bailey revealed that there are a few people who still don't know how to benefit from that appreciation without first thinking of reselling their home in order to make a profit.
"You can take out a home equity loan; you can access a second mortgage to pull out that additional equity of the house," she explained to Sunday Finance. Home equity has been a strategy that Bailey has used to finance the purchase of several other houses. She recommends that others try the same if their aim is to build wealth.
"So I always say to people that no matter what, it could be a matches box, get in the rental market by owning because, from a long-term perspective, that is always the better option," Bailey said.
The rental landscape locally is getting pricier and inflation is to blame. Bailey explained that the reasoning behind many renters is the limitations on their spending potential, but inflation is also pushing up property insurance costs and owning a home has gone up this year, pushing owners of rentals to increase their pricing.
"Your focus while renting should be on coming up with the deposit in the shortest amount of time. Yes, it does take from your savings, but the thing is you don't live anywhere, so you have to rent somewhere. You need a primary resident, so the move would be not to take an exorbitant rent," Bailey advised.
While there were no current stats available on the median price of a home in Jamaica, realtors Paul Morrison, from Keller Williams Jamaica, and Ingrid Vaz, an expert realtor associate at RE/MAX Elite, narrowed down an estimate depending on the location, with a focus in Kingston between $30 million and $40 million dollars, while renters typically set a budget between $70,000 and $150,000.
"Let's say your monthly payment is $100,000, a year later, you'd still be out of pocket and get $1.2 million, but at least a year later, with something that you own, you'd be gaining equity inside of it, and you'd actually be paying down on something you currently own," Morrison explained.
His sentiment is that no matter how bad the economy gets, it's always a good decision to buy over rent. However, he acknowledges that in the short term, rent can provide more flexibility and affordability. "The person will have to consider and make a long-term plan; it does require some significant up-front investment, like a down payment. They have to consider that," he told Sunday Finance.
The deposit is the reason people will rent, but according to Morrison, that challenge is slowly being eradicated with 100 per cent financing options and with more banks partnering with the National Housing Trust (NHT) under the external financing mortgage programme (EFMP). Still, many people tell themselves they cannot afford a house.
"It speaks to the fact that you have to be educated on the process by which you have to speak to a realtor because you will not know the possibility that lies," Vaz asserts. "It's always best to own your own property; if you can own your own property, do that; don't rent, start small. There's a thing that you want to find your dream home, you don't have to find it now, you can start the process now by buying something near enough to your dream home, and you can sell that and then buy a dream home two, three, four years later; it is perspective," she said.