You can rent, but that's money wasted. The longer you rent, the longer you didn't invest. Also rents are higher than mortgage payments, making it worse.
I really hate this mindset. I rented for about a decade. Renting allowed me to bounce around from job to job in various cities and grow my career. Had I owned houses during that time I would have lost money due to the transaction cost overhead. I was also not responsible for any upkeep, which I'm not well suited for anyway. Oh and I absolutely did invest. My money was simply invested in the stock market which had a far higher rate of return than the housing market.
I own today, but I'm well ahead of most of my peers that bought houses right out of college.
Yes people who move often shouldn't buy. No disagreement there. But that's like saying that you shouldn't invest in stocks because if you sell in a year then it's probably at a loss. Investments are to be held for a long period.
As for investing: you invested what you had left after rent, but you didn't invest what you paid in rent. With a mortgage, you are investing the mortage payment minus interest, and you can still invest what you have left.
If rent really is lower than the mortgage payment (assuming the alternative return on the downpayment is taken into account, etc) for an equivalent property, then buying is pretty reasonable in most circumstances.
I'm observing rents way, way below mortgages, but it's very location dependent.
When making decisions about where to put my money, I stopped worrying about what other people are going to do and are doing, what the market might do, etc, and instead think what makes _sense_ for me to do. If some expense makes sense for me, offers good value, etc, independent of attempting to prognosticate the future, it probably does for others as well and the investment will probably work out fine. If it doesn't, it doesn't matter, it still made sense for me to do it.
For me, this has meant buying a house when lots of my peers were running scared at what turned out to be the bottom of the housing market, selling one recently, and renting for the moment. In each case, this was just the cheaper and 'sensible' approach. I think people overcomplicated this stuff.
In the Netherlands, there are no places where rents are below mortgages. Unless you apply for social housing, but that requires you to be below a certain income threshold, which means that you couldn't have bought a house anyway. Social housing also have 20 years waiting list.
That sounds really weird. In Germany an apartment that rents for about €1000 would sell for €400,000 or so, which means a mortgage would cost 2 to 3 times more (with a 20% down-payment). This is with a 2% interest rate.
An apartment that's worth about €400,000 rents for about €1,550. The equivalent mortgage with 3.85% interest is €1875, but becomes about €1426 after tax breaks. The 10% down payment can and often is financed too. This leaves about €10,000 of notary fees and taxes that you have to pay yourself.
Interest rates used to be lower so the mortgage used to be much cheaper.
If the real estate market is near a local maximum, then rent is still a better deal, for now, with your numbers. Upkeep, hoa fees, insurance on an apartment very likely sum to more than €124/mo. That said, of course, if the real estate market is still going to grow by a significant percent, and you time selling correctly, then you could make money by owning.
But are rents higher than the mortgage + insurance + maintenance + lack of liquidity + the potential home value changes.
If the expectations is that the home value are dropping, the math seems pretty simple.
But in a different financial environment, maybe a few years from now, your expectations might be different and the math works out differently
Yes, in Netherlands, rents are higher than mortgage + insurance + maintenance + taxes - tax breaks. That's why everyone wants a house.
A bit odd that you talk about liquidity. The house itself isn't liquid, but you finance it so you don't need a huge liquidity up front. Also, rents paid are no longer liquid to you either.
A mortgage ends one day. Rents do not.
House prices increase 20% year on year in Amsterdam. Even during the 2008 financial crisis did they barely drop in value.
