Price-to-rent ratio, rule of thumb
Home price ÷ annual rent. Example: 9,600,000 ÷ 400,000 = 24, rent for now.
The test
Owning is not automatically better. The test is whether a mortgage payment, maintenance, tax and the return you give up on your down payment together cost less than renting the same place.
One ratio does most of the work
Divide the price of a home by its annual rent. That is the price-to-rent ratio. A rough rule:
- Above about 20, renting is usually cheaper.
- Below about 15, buying tends to win.
- Between 15 and 20, the answer depends on how long you stay and what the down payment could earn elsewhere.
Grownz's Housing screen asks for your rent and the price of a similar home, computes the ratio and gives a verdict. It is a filter, not advice.
The costs people forget
Buying and selling cost money: stamp duty or transfer tax, agent fees, legal fees, moving twice. Owning costs money every year: maintenance, service charges, insurance, the interest on the loan that never becomes equity. Renting costs the rent and, usually, nothing else.
How long you stay decides it
Under five years, buying rarely pays for itself, because the transaction costs are paid up front and recovered slowly. If you are likely to move for work, a relationship or a growing family, that matters more than the ratio.
What the down payment could do instead
The deposit you put into a home stops earning anywhere else. If it would otherwise sit in an asset that pays out, the planner counts that as passive income you gave up. Scenario Lab lets you compare the two paths without saving either.
