A recent survey by the empirica research institute in collaboration with LBS Research shows that buying a home is more lucrative for owner-occupiers than continuing to pay rent for a comparable flat indefinitely – into old age, as it were. The analysis is based on the latest sample survey of income and expenditure (EVS) carried out by the Federal Statistical Office. This is a survey that studies the housing costs of tenant and owner households over an extended period of time. The study compiled by empirica and LBS Research on this basis focused on tenants and owners with a monthly net income between 2,000 and 3,000 euros. It analysed actual housing costs. The benchmark chosen for the tenants to this end was the gross residential rent, while for owner-occupiers it was the sum total of interest and amortisation plus service charges including heating costs. The key finding of the survey is that the initial cost burden of homeownership tends to be higher than the housing costs of comparable tenant households. But in the longer term, homeowners reap more benefits.
Homeowners Benefit from Declining Housing Costs
While tenant households always face the possibility of steadily rising housing costs, the amounts homeowners spend on housing costs keep going down, or so the survey suggests. Once the property is paid off, owners rarely pay more than one in six euros for housing expenses, which reduces the housing costs for debt-free owner-occupiers to just 16 percent of their income, according to LBS Research. Renters, by contrast, keep spending nearly one third of their income on housing costs after the same period of time. Another advantage for owners is that their accommodations tend to be larger, as the survey discovered. Condominiums are often more comfortable and better equipped than rental flats. The survey authors believe this is explained by the balance in extra income that is available to homeowners after a certain time of having brought down their housing costs. Compared to a tenant household, these savings add up to approximately 100 euros a month – while cost savings increase over time, depending on the owner’s age. The savings are compounded by the tendency of homeowners to run more economic households, taking care of minor repairs on their own rather than calling someone, as a tenant is prone to do. However, the biggest advantage for homeowners aside from these modest savings, is that they no longer need to worry about rent hikes or being forced out of their homes.