Buy or rent a house? The answer is not easy, given the prices that are currently practiced in the real estate market, especially in large cities. And even with the pandemic, the sector showed no decline in value.

And the numbers speak for themselves. The cost at which banks assess real estate for the issuance of a mortgage will be disclosed this week, but in June it was 1215 euros per square meter. This is three euros more than in the previous month.

According to the latest figures from the National Institute of Statistics (INE), the largest increase compared to May was observed in the Algarve (1%). In the opposite direction, the Alentejo recorded the steepest drop (-1%), also compared to May. In the annual comparison, it is in the Lisbon metropolitan area that the “most intense” spread of 7.7% can be seen.

It is true that the value of banks’ valuations has been increasing since October 2020, after slowing down between June and September 2020. Apartments are still rated higher by banks than houses.

In addition, prices in the rental market have not improved much and the news is not encouraging for 2022. The July inflation rate set by the National Institute of Statistics (INE) was 1.5%, indicating a predictable increase for non-owners. However, according to a study by idealista, home rental prices in Portugal fell 4.7% in one year, that is, from July 2021 to the same month last year. According to the idealista price index, at the end of July this year, the cost of renting a house was 10.9 euros per square meter. In relation to the quarterly variation, the decline was -0.7%.

And while the figures vary from region to region, there is a common feature: at the end of the month, even after taking into account the costs of taxes, insurance, commissions and interest associated with bank loans, renting is always worth more than buying.

Along with value, there is also a psychological problem. Many Portuguese value the safety of the purchase: after the conclusion of the loan agreement, there is a guarantee that the house will pass into their hands. With regard to lease agreements, despite the right to renew, the landlord may one day ask the tenant to leave. What’s more, no matter how much rent you pay, you will never own real estate.

There are still other factors to consider. For example, renting can be ideal for those just starting out, wanting to leave their parental home, or have no income to buy. Mobility is also mentioned as one of the benefits of this option. In other words, it allows you to easily move to another home, given the length of the contracts, and you don’t have to wait for a good deal to sell, as is the case with landlords.

There are other criteria that need to be considered in order to make the best decision. In the case of a lease, you need to pay a monthly rent – initially you will need to pay the rent as an advance, which serves as a guarantee – and the cost of the work, depending on what is agreed with the landlord. In the case of purchases, you will in most cases have to resort to a bank loan, and usually financial institutions do not provide loans for the full purchase or assessed value.

For those with money to spare, buying a second home can be seen as a good investment alternative over traditional savings products. This trend is fueled by interest rates on deposits and other types of savings products, which are not very attractive, which gives rise to the need to look for other options.

Rent. Rights and obligations of both parties

Are tenants required to pay the costs of the condominium? They will only need to pay the rent – renewed every year. Costs such as condominium fees and renovations are the responsibility of the landlord. But there may be exceptions in the signed contract.

The tenant wants to leave the house. Is it possible to terminate the contract early? This is provided that the contract has expired at least six months. You must also give the landlord 120 days in advance. If you leave early, you will have to pay the rent corresponding to the missing notice period.

What are the responsibilities of the owner? He must carry out the necessary maintenance work, unless otherwise specified in the contract.

Can the lease be transferred to another person? The lease continues after the death of the tenant, and this situation must be reported to the landlord by registered mail and with a notice of receipt. Failure to communicate compels the eligible transferee to reimburse the landlord for losses incurred as a result of the omission. In the event of a divorce or separation of persons and property, if the lease concerns the family home, its destination can be determined by agreement between the spouses or in court.

How long does the contract last? The parties can agree on a fixed period or indicate that it has an indefinite period. If nothing is said about this, the contract is considered valid for an indefinite period.

Purchase. Care when choosing a loan

What precautions should you take when choosing a bank? First, you must contact your bank: defend your position and negotiate. You also have to run multiple simulations for different time frames. Always consider financing terms, fees, insurance and legal taxes. In addition to simulating the 1% and 2% interest rate increases, also ask for the calculations for the 3 or 4% interest rate increases. This way you will get an idea of ​​the worst-case scenario. If you find that the cost of supporting the payment is significant, run a new simulation for a longer period. However, the longer the term, the more expensive the loan.

What are the main costs? Expect a range of upfront payments that vary from bank to bank. This is the case for review committees or scrutiny and opening meetings (terminology varies). These fees often include an appraisal fee. The bank always requires a report with an appraisal of the property carried out by a technician. You can also expect to pay Municipal Property Tax (IMI) and Onerous Property Transfer Tax (IMT). Other costs to consider relate to the work of a lawyer, which is often provided by banks, such as bureaucratic procedures in the Land Register, the Financial Service and notary offices, among others.

What kind of insurance is required? You need to take out life insurance, which includes death or disability insurance, with capital equal to the amount of the loan to ensure that the debt is paid off if the owner becomes disabled or dies. You also need home insurance against multiple risks.