Purchase or lease: which option is more advantageous?

The dilemma between opting for buying or renting a residence remains pertinent for individuals in search of a new home. This is particularly relevant now, with fluctuations in mortgage interest rates following determinations by the European Central Bank, rendering real estate acquisition more appealing.

An analysis carried out by the research division of the Tecnocasa Group compared the monthly mortgage installments and rental costs for two- and three-bedroom apartments in the largest cities of Italy. The findings aid in establishing when purchasing becomes a more financially prudent choice than renting.

Purchase or lease a two- or three-bedroom apartment

The study is grounded on data from the first half of 2024 and considers average prices for middle-class second-hand residential properties. Tecnocasa analysts simulated the acquisition of a two- and three-bedroom apartment under the following conditions:

• 25-year mortgage duration.
• Average rate of 3.94% (as of August 2024).
• Financing up to 80% of the property's value.

The data juxtaposes the monthly mortgage payments and mean rental fees per city, and computes the minimum income necessary to be eligible for a loan.

Two-bedroom apartments: when buying becomes advantageous

In numerous Italian urban centers, the monthly mortgage payments for a two-bedroom apartment are comparable to, or even lower than, rental costs. This renders the purchase particularly enticing in cities such as:

• Bologna, Bari, Turin, Verona, Palermo, Genoa.

In major cities like Milan, Rome, and Florence, mortgage payments still surpass rents, albeit by a slight margin:

• +146 euros in Milan.
• +65 euros in Rome.
• +130 euros in Florence.

Even in Naples, where buying currently yields lower profits, the variance is merely 39 euros, rendering a mortgage a viable option for those aiming to invest in property.

Three-bedroom apartments: where purchasing is more advantageous

The scenario with three-bedroom apartments mirrors that of two-bedroom units. Monthly mortgage payments prove more financially beneficial than renting in cities such as:

• Bari, Verona, Turin, Palermo, Genoa, Bologna, Naples.

Even in pricier cities like Milan, Rome, and Florence, the discrepancy between a mortgage and rent is minimal:

• +18 euros in Milan.
• +20 euros in Rome.
• +152 euros in Florence.

This indicates that, with the decrease in interest rates, purchasing a three-bedroom apartment is becoming more feasible even in costlier cities.

The rental market situation

An additional factor propelling individuals towards buying is the scarcity of rental properties. In various cities, the rental market has considerably contracted, making it challenging for tenants to secure housing. This structural imbalance, coupled with escalating rents, is prompting many to contemplate purchasing as a more sustainable and strategic choice.

Projections for 2025

As per forecasts by Tecnocasa, property values are anticipated to continue rising in 2025, with a slight uptick in transactions. This indicates a stabilization of the market at new levels.

Nonetheless, reduced mortgage rates ensure that homeownership remains within reach for those seeking a long-term investment. Despite potential price hikes, buying continues to be advantageous in a constrained rental market.

Conclusion

The decision between buying and renting hinges on various factors: financial capacity, market dynamics, personal inclinations. Nevertheless, the decline in mortgage rates and the surge in rental prices amidst a housing shortage are rendering real estate acquisition increasingly appealing, particularly in major Italian cities.