Sunday, 19 February 2012

To Buy or to Rent - Guest Post

                           Networking in progress

A friend of ours, Raphi Bloch,  recently began a blog about the property market in Jerusalem. Here is one of his early posts, posted here as a guest post with his permission.

This post is on the topc of whether to buy / rent It is linked to his blog so do visit him too.

Many of those looking for a new home in Jerusalem approach me with the question “should I buy or should I rent ?”  Although there is no one answer to the question there are many considerations which help one come to the answer that is right for them.

Many economists claim that renting makes more economic sense in that once you have factored in finance costs, buying costs more over he long term. While this may be true in a market where property prices are unstable, Jerusalem property generally retains and even increases its value over the medium to long term (the current downturn not withstanding). Add to this the fact that rentals in Jerusalem are comparatively high due to the high demand by students, visitors on one year programs and young families who as yet do not own their own home and you will often find that the difference in the rent paid and the cost of servicing a mortgage is very small.

However not everyone has the luxury of being able to buy. Banks in Israel are very strict on the amount they will finance on a mortgage with the norm being only about 60% – 70% of the assessed value of the property which is normally quite a bit lower than the market price. This means that a potential buyer needs to have about 40% of the purchase price as a down payment . There are mortgage insurance companies who do enable one to take a higher mortgage but again not everyone can meet the requirements to qualify.

Buying does have many non financial advantages. When living in your own apartment you have the security of knowing that you will not be asked to move at the end of a lease as well as the luxury of renovating your home to meet your exact taste. The argument that one does not always know if in a few years you will need to move,for example changes of jobs or family size, is one that many pro – renters often quote. Two options exist for the homeowner – renting out the current apartment which as I mentioned above is an easy task in Jerusalem or selling and buying another home – again relatively easy over the medium to long term.

Many of my buyers tell me that one of the strongest reasons to buy as opposed to renting in Jerusalem is the emotional one – knowing that they own a property in the Holy City. While this is obviously subjective it does explain why many investors insist on buying in Jerusalem when on paper there are better investments elsewhere in Israel and indeed the world but this is a topic for another post at a later date ……….

Shalom from Jerusalem


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