Price-to-Rent Ratio Calculator
Compute price-to-rent ratio = Property Price ÷ Annual Rent. Universal rent-vs-buy decision framework. Under 15 favors buying; over 20 favors renting; 15-20 mixed.
Price-to-Rent Ratio Calculator
How to use the Price-to-Rent Ratio Calculator
Enter the price and a comparable rent
Use a specific property and the rent for the same or a comparable home nearby: same size, same building or street. The ratio is price ÷ annual rent; its inverse is the gross rental yield.
Set the yearly costs of owning
These turn the price into a yearly cost of owning: what the down payment could earn elsewhere, property tax, upkeep and a premium for the risk of owning, minus expected price growth and any tax deduction. The defaults are the illustration in Himmelberg, Mayer and Sinai (2005), with the tax deduction set to zero; adjust each to your situation.
Read the comparison
The tool compares the cost of owning with a year's rent, and shows the break-even price-to-rent ratio: the most you could pay, in years of rent, before owning costs more than renting. If the asking ratio is above the break-even, renting is cheaper on these assumptions.
Test the assumption that matters most
Expected price growth comes straight off the cost of owning, so it moves the answer more than anything else. Lower it by a point or two and see whether the verdict survives. Moving costs and how long you will stay are not in the model.
Price-to-rent ratio — the single number that frames the rent-vs-buy debate
The price-to-rent ratio says how many years of rent the price equals. On its own it cannot settle rent versus buy, because the cost of owning depends on interest rates, taxes, upkeep and expected price growth, and those differ by place and over time. As Himmelberg, Mayer and Sinai put it in their 2005 Federal Reserve Bank of New York staff report, comparing price-to-rent ratios over time without considering those costs is misleading. So this calculator prices the cost of owning directly and compares it with the rent.
The user cost of owning
The report sets out the annual cost of owning, per dollar of price, as u = r + ω − τ(rm + ω) + δ − g + γ. r is the return the money could earn safely, ω the property tax rate, τ the tax rate at which mortgage interest and property tax are deducted, rm the mortgage rate, δ maintenance and depreciation, g the expected price growth and γ a risk premium for owning rather than renting. Owning costs u × price a year, and it is cheaper than renting when that is less than the annual rent. The break-even price-to-rent ratio is 1/u.
A price-to-rent ratio is a price. Whether it is high depends on what owning costs, and that depends on rates, taxes, upkeep and what you expect prices to do.
The paper's illustration, and this page's defaults
The report's worked example takes a 4.5% risk-free rate, a 5.5% mortgage rate, a 25% tax rate, 1.5% property tax, 2.5% depreciation, a 2.0% risk premium and 3.8% expected growth. That gives a user cost of 5.0%, so a home would be worth up to 20 times its annual rent, and a flat renting for USD 1,000 a month could sell for up to USD 240,000. This page uses the same figures but sets the tax rate to zero, because a deduction helps only owners who itemise in the US. That raises the user cost to 6.7% and the break-even to about 15 times rent. On the defaults, a USD 500,000 home renting for USD 2,500 a month is 16.7 times rent, so owning costs about USD 33,500 a year against USD 30,000 of rent.
What the model leaves out
It is an annual comparison, so it ignores the one-off costs of buying and selling, which make owning cheaper the longer you stay. It also does not model a mortgage's leverage separately, rent rising over time, or anything that is not money: stability, control over the home, flexibility to move. Use it to see which assumptions decide the answer, then weigh what it cannot price.
Price-to-rent against the user cost: the break-even ratio is 1 ÷ the yearly cost of owning
Price-to-rent = price ÷ annual rent. Its inverse is the gross rental yield: 20× is a 5% yield.
User cost u = safe return + property tax − tax deduction + upkeep − expected growth + risk premium (Himmelberg, Mayer and Sinai, 2005).
Owning is cheaper than renting when u × price is less than a year's rent.
The break-even price-to-rent ratio is 1/u.
The paper's illustration gives u = 5.0%, so up to 20 times annual rent.
In that illustration a flat renting for USD 1,000 a month could sell for up to USD 240,000.
This page sets the tax deduction to zero by default, which raises u to 6.7% and the break-even to about 15×.
Expected growth comes straight off u: each point assumed is a point of the price a year.
The defaults' USD 500,000 home at USD 2,500 rent is 16.7× rent, above the 15× break-even.
The model is annual, so it leaves out buying and selling costs, which favour owning over long stays.
Frequently Asked Questions
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It is widely attributed to Trulia, but this page no longer uses it: a fixed cut-off cannot know your interest rate, taxes or expectations, and those are what decide the answer. The calculator instead works out the break-even ratio from the user cost of housing, following Himmelberg, Mayer and Sinai (2005). On their own illustrative assumptions that break-even is about 20, and on this page's defaults about 15.
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The user-cost comparison is built for a home you would live in: it asks whether owning costs more or less than renting the same home. For an investment property, use the rental property ROI calculator instead, which works from rent, operating costs and financing to cash flow and return on the cash you put in.
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They are in the model, as g, and they matter more than anything else: expected growth is subtracted straight from the yearly cost of owning. That is also its danger. The 2005 report describes a bubble as buyers holding unreasonably high expectations of price growth, which makes owning look cheaper than it is. Run the calculation at a lower growth rate before trusting a buy verdict.
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The model here is a yearly comparison and does not answer that directly. The longer you stay, the more years the one-off costs of buying and selling are spread over, so a borderline result tips towards owning with a long stay and towards renting with a short one. Add your expected buying and selling costs, divide by the years you expect to stay, and add that to the yearly cost of owning.
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This page does not have a sourced figure for Singapore's ratio. What the user-cost model says in general is that a high ratio is consistent with low interest rates, low holding costs or high expected growth, and it is not by itself proof that prices are too high. Singapore's own rules on financing and buyer's stamp duties also change the cost of owning, so enter your actual figures.
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Yes, if you compare like with like: a condo against condo rents, a house against house rents. Condo service charges or HOA fees are a cost of owning that renters do not pay directly, so add them to the maintenance figure as a share of the price (yearly fees ÷ price), and lower it if the fees already cover repairs you would otherwise pay for.
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Then the answer depends on the inputs rather than the ratio. Compare your ratio with the break-even the tool computes, and vary the two assumptions that move it most, expected price growth and the return your money could earn elsewhere. If the verdict flips within a range you find plausible, treat it as close and decide on what the model cannot price.
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A fixed threshold cannot stay right, because the break-even ratio moves with interest rates, taxes and expectations. The 2005 report makes this point directly: changes in user costs lead to predictable changes in the price-to-rent ratio that reflect fundamentals, not bubbles. That is why this calculator computes the break-even each time from the costs you enter.
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No. All calculations run entirely in your browser via JavaScript. There's no server roundtrip — open DevTools → Network and confirm zero outbound requests. Your property + rent data stays on your device. Safe for confidential housing decisions, family planning conversations, or any personal financial data.
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Use listings: the asking price of a home and the rent of a comparable one nearby, ideally the same size and building type. For the cost-of-owning inputs, take the mortgage rate from a lender quote, property tax from the local authority, and the safe return from a government bond or deposit rate in your currency.
Method & sources
How it computes
P/R = price / annual rent. Judged against the user cost of housing (Himmelberg, Mayer and Sinai 2005): u = rf + property tax - t(mortgage + property tax) + maintenance - growth + risk; owning costs u x price a year and the break-even P/R is 1/u. RecaProperty.priceToRent, tested on the paper's own 5.0% / 20x illustration.
What this tool implements
- The page graded the ratio against fixed 15/20 thresholds attributed to Trulia, with verdicts 'BUYING IS BETTER' / 'RENTING IS BETTER' that ignore rates, taxes and expected growth. Seven cost inputs now price owning directly; defaults are the paper's illustration with the tax deduction set to 0 (u = 6.7%, break-even ~15x).
- The paper's own warning is quoted in substance: comparing price-to-rent ratios over time without considering user costs is misleading; expected growth is the assumption that drives a bubble.
- Removed as unsourced: city ratios (Manhattan, Boston, Detroit...), Singapore and Hong Kong ratios, the 'held up for 15 years' claim, GRM x 12 and transaction-cost ranges.
Sources
- Himmelberg C, Mayer C, Sinai T. Assessing High House Prices: Bubbles, Fundamentals, and Misperceptions. Federal Reserve Bank of New York Staff Report no. 218, September 2005 (Journal of Economic Perspectives 19(4):67-92). https://www.newyorkfed.org/medialibrary/media/research/staff_repo…
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