It seems obvious that buying a house is financially better then renting. The monthly cost is usually similar (this is because the market adjusts to keep them similar. If renting were more expensive, everyone renting could afford to buy. They would do that which would push up house prices and push down rents. Buying can theoretically be more expensive than renting (imagine a society made up only of poor workers and rich landlords, where house prices are set by what landlords can afford) but usually housing pressure pushes up rental prices first, to match the most people can afford, then housing prices rise slower, because of the bottleneck of the difficulty in getting mortgages. When rents are much higher than mortgages that means the government and banks are severely hindering people who have the means to get mortgages from getting them, probably to the advantage of investment funds and other cash buyers) and one results in eventually owning an asset while the other does not.

But to verify this, a thought experiment is required.

1. you are already renting a house
2. you buy a house
3. instead of living in the new house, you rent it out to someone else.

So here you have a situation which is financially identical to buying and living in a house, but you are still renting. The rent you receive offsets the rent you pay. (please, all the people who like nitpicking, ignore the different tax implications etc for now.) This house is a financial investment that can be compared against others, like savings accounts and stocks. It’s possible to study if the return in investment would have been better had you chosen a different investment.

The capital investment is the deposit. If you invested the deposit amount in whatever, then added to it the mortgage amount every month, you would accumulate some wealth. I’d the wealth you accumulate from the house is greater, accounting for the profit the bank extracts from your investment through interest, then you should buy the house. That is the test.

(of course there are other benefits to owning your own house but they are out of scope. this is a purely financial argument)

The bank takes a huge cut of your profit. You might pay the bank in interest double what you pay the seller. So you pay for the house three times. That is worse than the cut taken by a broker of any other investment.

Cash buyers (investment funds) do not pay 3x the price of the house. So maybe you’re better off investing in housing through an investment fund!

I don’t actually know if it is usually better to buy than to rent. I have never done this calculation. I only know that most people assume so, without ever doing the calculation.

One possibility is that the market self-adjusts so the buying and renting (taking your deposits for the house and investing it in something else) are equally profitable.

I suspect that the market is set by what investment funds (not people) are willing to pay. So house prices are set so that they are equally profitable for them as other investments. This means houses are less profitable than other investments for non cash buyers. It means most people should continue to rent, instead of buying, and just invest their money better.

This article feels a but unfinished, like there is something missing it overlooked. Maybe someone else can spot it. I think more thought or research, or putting more minds together, is needed.