Buy vs. Rent - What is better?
Real estate in Israel is expensive, and it keeps rising each year. Many people wonder whether it is wise to buy now. Generally speaking – yes, it is always better to buy unless you know for sure how to invest your money, so in the long term, your investment profits will be greater than the apartment value. But since most of us are not experienced investors or stockbrokers, the answer remains to buy.
The real question we want to discuss is the best thing to do when you are unsure where to live, whether you already live here or are about to make aliyah.
Buy vs. Rent when you are not sure
This is a very good question for those about to make aliyah, those who are not quite sure where they want to live, especially if the distance between the options is significant. If you are one of these, then you probably consider renting an apartment for a year or two and then deciding whether the area is worthy or not. It might sound like a good idea, but let’s take a closer look, check the numbers, and compare the two options.
Since you are going to buy a property in the future, we compare only rent expenses to purchasing and selling expenses of the first apartment. Let’s say that your budget is 1 million nis. Here are the approximate significant expenses for buying and selling the first property of 1 million worth:
Lawyer – 8,775*2 = 17,550
Broker – 22,400*2 = 44,800
Ignoring some minor expenses and the fact that the broker will bargain the best price for you (and therefore reduce the brokerage fee), your additional expenses will be 62,350 nis.
Renting expenses:
Broker – 3,500
Monthly rent – 3,000*12=36,000
Total: 39,500 nis
The last factor we consider is the rise in housing prices. According to the CBS Housing Price Index, housing prices have risen by about 7% (!) in the past year (2020-2021). Let’s hope that such an increase was only one-time, and the following year the prices will increase just by 2%. Therefore, let’s reduce 20k from the first option (since the property is sold for 20k more) and add 20k to the second option (since the property we buy after a year costs 20k more), and we get the following:
Buying and selling = 62,350-20,000 = 42,350 nis
Renting = 39,500+20,000 = 59,500 nis.
Difference = 17,150 nis.
According to these simple calculations, renting for just one year increases your expenses by 17,150 nis, and renting for two years will increase it by 57,150 nis. The higher the property price, the higher the difference, and if we don’t ignore the broker’s job to save you money while buying and selling the first property, the renting expenses can be doubled.
It is hard to decide unequivocally that buying is always better when you are not sure where to live, but we can say without a doubt that renting, even just for one year, increases your expenses by tens of thousands of shekels.
If you are still undecided or want to know how we can reduce your expenses, feel free to contact us and promise yourself the best real estate experience in Israel.