10 June, 2020
Benefits of buying if you are under 32
More young people are buying
Millennials and the upcoming generation Z have changed the perception of homeowning compared to other generations and have moved more towards renting and sharing. However, due to the rising prices of rental in Barcelona an average young person in Barcelona has to spend more than 40% of their monthly salary for renting a shared apartment. The rental prices have been increasing on a year-to-year basis for the past few years and across the city it has increased by 36,9% since 2014. This indicates that young people are forced to pay an increasing amount of their salary for accommodation as rental prices are increasing the gap to the salaries and less people take the decision to leave their family home.
On the contrary, Barcelona has seen a slight decrease in prices since 2019 on property purchase. The pandemic will create temporary opportunities for expats and younger people that want to move to Barcelona. It has also been noted that younger people tend to buy sooner.
Due to the pandemic you will be able to acquire lower interest rates than before and properties at lower prices. Younger investors will also be able to lock in favourable interest rates for 10, 20 or 30 years and take advantage of the situation. And more importantly, be able to own a property which has become less common with the new generations yet more important. Now we will speak about the benefits of buying.
What are the benefits of buying ?
There are many benefits buying if you are under 32, compared to renting. One obvious point we can look at, is the price of renting a place vs the price of a regular mortgage on buying a studio or small apartment.
Say you want to buy an apartment for 180K in Barcelona and you have already 60K saved. According to IMSmortgages.com, if you take a loan for 140K, which you would get at a 3% interest rate and pay over 20 years, the monthly repayment will be 776.5 euro. The standard price of rent for a small apartment in Barcelona centre is 700 euro and upwards/ month, meaning that the repayment for your loan is almost the same as you would pay for monthly rent.
So how is it beneficial to own instead of renting? The benefit comes down to the fact that you now own an asset. This will assist you in future loans when the banks assess your profile. It could also generate a passive income source if you would decide to rent it out. This is a very powerful tool to have as a young professional under 32. In fact, it helps generate income for you later on. It can simply also be viewed as an investment. For example if you plan to sell when the market prices are higher, and hopefully get a loan.
Also to note, the transfer tax to the government is only half of what it would be if you are over 32. If you purchase under 32, you only pay 5%. But if you purchase when you are over 32 and will have to pay 10% in transfer tax.