Buy or rent?

22 comments

1. What do you want in life?

   Renting alows you to live carefree (not paying for major repairs) while being able to easily switch appartments every 2 years, and investing some of the money you would have used to repay your mortgage.

   If you want to live there for a longer period of time, don’t care about the stock market or if you have kids, buying might be more interesting.

2. Renting brings the big problem that if you ever make less money, you can be kicked out. If you have payed the house/Appartement off, its fully yours. Also, if you rent, you have to ask permission for basically any big change that you want to do. Some owners (not all!) even ask that you polish or repaint you walls/floor regularly.

   As for the difference in the sizes, I can’t speak for you. If you’re content, then you do you. I myself would rather live outside the city, since everything is well connected, public transport is free, houses/apartments tend to be cheaper and you don’t have to go that far to get into the city.

   Hope you find what you’re looking for

3. This is what people keep missing/ignoring/straight out denying in the housing debates. The differences in renting and buying prices were considerable even when interest rates were 1 percent. Now that we are sliding towards 3 percent, the differences are shocking. I would not pay 4500 e per month to live in the apartment from your example. So comparing just the two and if you absolutely must be in Bel-Air and there is nothing in between (is there?), I would just rent this and maybe buy an investment property in another country just so you have something for later.
   But I would also try to look for middle ground. I get the aversion to rural living but there are cheaper areas in Lux Ville than Belair and this apartment also seems laughably overpriced.

4. >I am trying to understand the appeal between opting for buying the stuff that one can buy for such an amount vs renting one of the properties that are being rented out for that amount.

   Advantage of buying

   * you protect yourself against future rent increase. E.g. in theory, you could lock in a fixed financing of 4,500€ p.m. for the next 30 years. If you rent, then your rent will inevitably follow inflation. Even if your lease doesn’t include an indexation every x years, you’ll have to pay higher market rates if you move out;
   * you can’t be thrown out of your place. While a landlord has limited options to throw a tenant out, s(he) still can;
   * within your four walls, you can do as you please and make changes to the interior (e.g. the kitchen, bathroom, bedrooms, etc.)
   * With a housing budget of 4,500€, you are likely to be able to afford a second property in X years’ time allowing you to rent out the first property to complement your pension. Alternative, it’s an assets that you can hand down to your kids, nephews, nieces, etc.

   Downsides are:

   * you have to fork out for small and big repairs
   * if financed => long term solution
   * it’s not as easy to change apartment (E.g. you want to get one kid but instead end up with triplets. It will less fuzz from an administrative perspective to move to another rental property than trading a property for something larger)

   Really depends on 1) what you want long term 2) what is available 3) what financing conditions you can get and lots of other factors.

5. Visit a few branches. Online calculators use interest rates above what you will get when speaking with someone. But it’s a detail.

   Personally, I would move away from renting, above all. If not in Belair, I would go out of the city, or across the border. If nothing works, I would leave Luxembourg with no regret. In no way I would live under rent forever.

6. The usual dilemma!

   If you expect your income to increase significantly in the future, then go for a rent and you’ll buy what you want when you can afford it.

   If no significant increase foreseen, either you rent more or less what you want, don’t save for the future and will have spent tons of money without any return and without being ever able to improve what you rent (actually not even be able to rent the same as prices will increase more than your rem), or make the compromise now, and follow the increase in the market which will allow you to buy better and better every 3 years (what most people who can afford spending 3k+ are doing actually).

   Btw I am not sure I would see Belair as a place where you can walk to everything and have your kids going to the park and meet with friends (rather as an old and posh suburb, still far from the centre and too much in town to let kids go out)

7. Long or medium term, the rents in Luxembourg have only one direction, UP. Not this year as the rents have been freezed but as more and more people try to rent because they think it is cheaper than buying, the more rents will increase.

   With inflation this will be even more true.

   Brace yourselves. Don’t make decisions based on today but more based on what the future holds.

8. If you say you can afford 4500/month, is that on your income or Family income? I gather from one of your responses that you have (a) kid(s) and would like to have possibly more. If your wife or yourself need to reduce work time to look after your kids (or have increased day care costs), are you still able to spend EUR 4500? Or does this go down. Also with what you would be able to buy, would that still be fine with an additional kid or would you look for something larger? A definitive answer seems therefore complicated. I would say without knowing more, renting gives you a lot more flexibility.

9. I came from London thought I would buy but honestly the prices here make no sense. It is a total bubble. The money is now harder to obtain and surely unsustainable at current prices. I kept the cash and am buying in France a nice place to enjoy with the kids for now and retire to later without having to pay a mortgage I to my 70s

10. Depends on what your timeline is. Because the transaction fees in Luxembourg are so high (like 20-30k in notary and registration fees), it only makes sense to buy if you’re going to hold the property long enough to make those fees back in housing price appreciation + the equity you accumulate from paying down your mortgage.

    I would say if you plan on staying in Lux for 5+ years you should consider buying a property that is reasonably likely to appreciate (i.e. in a favorable location and condition). Otherwise, rent something cheap

11. The rent price will go up in the coming years.

12. Another solution would be to buy several flats in area where the return on investment is higher and is advantageous from a tax perspective in order to rent a house with the money of the flats renting.

    I know some people who are doing this. In any case it has to be addressed with a tax counsel.

    This could be interesting since you are still growing a real estate capital without having to compromise by living in a small apartment.

13. Buy. By the way plenty of cities outside of Luxembourg city have stuff in walking distance and probably more parks than in the city, at least more accessible. I understand your point but the main arguments are little weak.

    Rent is tied to inflation whereas your mortgage is not. This means your investment will appreciate over time and you will at worst come out break even whereas with rent you will always be negative balance.

    4500€ is insane. I actually pay less mortgage than I would pay rent.

14. don’t bother yourself calculating. renting is key for an happy couple

15. Wow, that mansion looks great..

    Have you done the opposite review, how much would it cost to rent a similar apartment compared to buying it?

    Fun fact? 25 years ago we rented a 2 bedroom apartment in belair for eur 700

16. If you spent over 1 million € for such a crappy appartement, you lost your mind. Why do you need to live in Belair? But I wouldn‘t rent this house either. You can find better options for way less but then it‘s not in Belair but who cares?

    I will also rent now because those prices are just crazy and the market is heavily overpriced. But I might be wrong. In the crisis of 2008, the house prices here didn‘t really care so…

17. Btw, does anyone know what the interest rates are currently? I heard they already were like 2.8%?

18. A middle ground would be to rent smth slightly less grand and cheaper (eg for 3000) and invest the rest in property abroad or otherwise…

19. If you rent you are giving that money away for good. If you buy you may sell the place once you don’t need it any more (or your heirs can) and you get at least the same amount of money back. The prices may rise some more but realistically they are very high already, not many people are able to pay more than now. Even imagining that the prices will actually drop, you will get at least some money back. Not so with renting.

    Plus in your own you can do any modifications you want, either it’s hang a picture on a nail or change the whole inbuilt kitchen.

20. Buy a cheaper appt and rent that to a tenant. Then rent yourself whatever you want. That way you are exposed to market and hedged against further increases, on the ladder in Lux and can live where you want. Just need to be careful on CGT and bank / landlord rules.

21. Hi,

    A lot of the comments seem to miss the point that there is a point at which renting makes more sense than buying. Whether we are at that point today in Luxembourg is a question mark, but buying is not always the obvious answer.
    People have taken this answer for granted for a long time, but every now and then it’s good to check if the belief still holds true.

    Having lived in cities such as London, Paris, or NYC before, nowhere have I felt so unsure about buying as here:
    – Here my rent feels very cheap in comparison with the price of the house I’m in
    – The available stock of properties to buy simply doesn’t feel appealing (e.g., architecture wise etc)
    – Annual increases of +10-15% might not be sustainable. People who think buying is the obvious choice because they assume such increases will continue might be in for a bad surprise
    – Rent prices: are kind of locked. They can go up with inflation and there’s always the off chance you get kicked out, but overall Luxembourg regulation is quite advantageous for renters compared to what I’m used to in Anglo Saxon countries

    Ps: the 2 options that the original post mentioned (the 80 sqm apartment vs the very nice house in Belair) ; that’s just such a great and striking example !

22. I would rent something cheaper and use the remaining balance to buy an investment property abroad.

    Definitely, I wouldn’t buy that apartment from you link, as you can rent this here: [https://www.athome.lu/location/appartement/luxembourg/id-7458018.html](https://www.athome.lu/location/appartement/luxembourg/id-7458018.html) in the same street (maybe even the same building), it’s 22 sqm bigger, has 1 bedroom more and the rent it more than 2000 eur lower than your monthly payment in case of buying would be.

    If I would decide for me, I wouldn’t rent this apartment above as well, but would look in other neighbourhoods or communes for something else, more suitable for a family and wouldn’t be so fixed to have to live in one specific quarter of the city.