Renting vs. Buying Property

renting vs buying

Potential home-owners are always faced with the dilemma of choosing between buying and renting property.

Many individuals dream of owning a property of their own but such aspirations must be dealt with tactfully. Notwithstanding, these two forms offer their own peculiar benefits, depending on the individual and the situation at hand.

Overview of the Real Estate Market in Ghana

According to the Ghana Statistical Service, the real estate industry, along with professional, administrative and support service activities contributes to 4.8% of Ghana’s GDP. The growth, however, has been relatively slow according to government statistics, which puts Ghana’s housing deficit at over 1.7 million units.

A number of factors have led to this challenge, namely, land acquisition, a high cost of building materials and a lack of data on housing just to mention a few. These challenges, however, are not expected to slow down investment in the sector, mainly due to the growing demand.

Buying

Buying property may be a somewhat cumbersome nature in Ghana but it also comes with certain benefits. The major benefit of owning a property is the appreciative nature of its value. A property in Ghana is more likely to appreciate than depreciate in value and that trend has followed through right from the time of Ghana’s Independence.

The added benefit of securing financing is also welcoming news to property owners. A property owner stands a higher chance of securing funding for an investment when his or her home is included in a collateral agreement. Banks deem it less risky dealing with such individuals and can help many individuals go a long way in pursuit of their business.

An individual can decide to pre-purchase a home, acquire through a real estate developer or gain mortgage financing. Unfortunately, most individuals’ purchasing power may inhibit them from making such a venture. This form of property acquisition would mostly suit individuals in the mid-to-upper income bracket.

Renting

For many aspiring homeowners in Ghana, the dream to immediately own a home may prove too daunting in the short term to venture. Such individuals, thus, would be better served to rent a property than buying one.

One has to assess the size of his or her bank account vis-a-vis their immediate future plans. For instance, a newly-wed couple within the middle-income bracket would stand to benefit more in renting a property than buying one. According to the Bank of Ghana 2008 report, the lowest price for a semi-detached house was $30,000. For such individuals, earning more income would be more prudent before engaging in property acquisition.

The monthly cost of renting can be relatively lower than home acquisition. Monthly rent payments can go for as low as GH$200 a month. Tenants are also spared the stress of paying property taxes and in most cases, maintenance costs.

Renters, in effect, have the luxury of venturing into other investments with the added savings. Some of these could include venturing or expanding a business and investing in a child’s education.

Renting also affords individuals the flexibility to move from one neighbourhood to another. This is especially essential to an individual who needs a home close to his or her workplace.

 

Rent vs Buy Frequency Asked Questions

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[accordion-item title=”What is Rent Vs Buy Calculator” id=rentvsbycalculator]

Rent Vs Buy Calculator

A quick strategy to arrive at the best solution about which is best on Renting or Buying is to use the Calculator. The Rent Vs Buy Calculator shows related locations with their cost properties and their total monthly cost, yearly cost of buying the property. A calculable amount is arrived for the user to differentiate whether renting the property might suit their situation. You can find a credible Rent vs Buy Calculator here.
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[accordion-item title=”What is Tax Deduction When Buying or Renting?” id=taxdeductible state=closed]

A tax deduction is a depletion or price cut of income that is able to be taxed and is commonly a result of expenses, particularly those incurred to produce additional income. The difference between deductions, exemptions and credit is that deductions and exemptions both reduce taxable income, while credits reduce tax.

In Buying a property, the only settlement or closing costs you can deduct on your tax return for the year the home was purchased or built are Mortgage Interest and certain Real Estate Property taxes. These can be deducted in the year the property was purchased if your deductions are itemized.

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[accordion-item title=”What is Rental Income Tax in Ghana?” id=rentalincometax state=closed]

Rental income attained by occupants is susceptible to a final withholding tax levied on the gross rent. Rental income from leasing residential properties is subject to 8% final withholding tax, and rental income from leasing nonresidential properties is subject to 15% final withholding tax.

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[accordion-item title=”What is Property Tax when Buying?” id=whatispropertytax state=closed]

Property Tax is levied yearly by local authorities on the estimated value of the property, depending on the classification of the area where it is located. The rates range from 0.5% to 3%.

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[accordion-item title=”What is Equity when buying a home?” id=whatisequity state=closed]

Equity is the amount you own on the property you acquire. If you borrowed to purchase the property, your equity can be calculated by subtracting your loan balance from the actual value of the property.

If the quotient of the subtraction is negative, then you have negative equity because the home is worth less than you owe on it.

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[accordion-item title=”What is the current Mortgage Rate in Ghana?” id=mortgagerateinghana state=closed]

The average base rate for mortgage loans with most renowned banks in Ghana stands at 33.6 percent.

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[accordion-item title=”Which is Riskier? Buying a house vs Investing in Stocks.” id=buyinghouseorinvesting state=closed]

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