Rent increase over 20 years: how it changes your buy or rent decision

Rent increases: why 20 years completely change the picture

A 2–3% annual rent increase looks harmless on paper. But over 20 years, compounded hikes can add up to tens of thousands of euros. That’s exactly the time horizon most people use when they run a buy or rent simulation.

In our simulator on buy-or-rent.net, this key parameter is called augmentation_annuelle_loyer (annual rent increase). It models how your rent evolves over time, usually linked to an inflation or rent index. Understanding its impact is essential before deciding whether to buy or rent.

How the annual rent increase works

In many European markets, rents are revised once a year based on an index (IRL in France, CPI or similar elsewhere). Over recent years, such indices have often averaged around 2–3% per year, with higher spikes during inflationary periods.

Basic formula

If your initial rent is R₀ and the annual increase rate is t, then after n years your rent becomes:

Rₙ = R₀ × (1 + t)ⁿ

In the simulator, the parameter augmentation_annuelle_loyer is this t (for example 2% = 0.02).

Simple 20-year example

Assumptions:

• Initial rent: €900 / month
• augmentation_annuelle_loyer (annual rent increase): 2%
• Duration: 20 years

After 20 years:

Monthly rent in year 20 = 900 × (1.02)²⁰ ≈ €1,338

That’s an increase of about 49% for the monthly rent alone. But the real story is in the total rent paid over the period.

How much do you really pay if you rent for 20 years?

To see the true impact of rent increases over time, you need the cumulative rent, not just the rent in year 20.

Detailed example: €900 rent with 2% yearly increase

Parameters:

• Initial rent: €900
• augmentation_annuelle_loyer: 2%
• Duration: 20 years

Year 1 annual rent: 900 × 12 = €10,800. Year 2 rent becomes 900 × 1.02 = 918 €/month, or €11,016 per year, and so on.

The total over 20 years is a geometric series:

Total 20 years ≈ 10,800 × [(1.02²⁰ − 1) / 0.02] ≈ 10,800 × 24.3 ≈ €262,440

So with an initial €900 rent and a 2% annual increase, you pay about €262,000 in rent over 20 years. That’s the full purchase price of a property in many medium-sized cities.

What if rent increases by just 1% more?

Now take the same example but with a 3% annual rent increase instead of 2%:

• augmentation_annuelle_loyer: 3%

Rent after 20 years:

Monthly rent in year 20 = 900 × (1.03)²⁰ ≈ €1,625

Total rent over 20 years:

Total 20 years ≈ 10,800 × [(1.03²⁰ − 1) / 0.03] ≈ 10,800 × 26.9 ≈ €290,520

By moving from 2% to 3% annual rent growth, you pay roughly €28,000 more over 20 years. That’s similar to typical notary fees plus initial renovation costs when buying a property.

Comparing with buying: how augmentation_annuelle_loyer changes the outcome

When you use a buy or rent simulator, you usually compare:

• Scenario 1 – Renting: your rent increases each year (parameter augmentation_annuelle_loyer), and any savings you can make are invested at a given investment rate (ETFs, savings accounts, etc.).
• Scenario 2 – Buying: you pay a mortgage, notary fees, ongoing property tax, borrower insurance (insurance rate), and maintenance / renovation costs.

The annual rent increase has two major effects:

• It significantly increases your total cost of renting.
• It reduces your future saving capacity compared to a fixed mortgage payment (ignoring property tax increases).

Numerical 20-year comparison: rent vs buy

Let’s use realistic 2024-style assumptions for a typical European market.

• Purchase price: €250,000 (existing property)
• Down payment: €25,000 (10%)
• Loan rate: 3.6% fixed, 20 years
• Borrower insurance rate: 0.3% of initial principal per year
• Notary fees: 8% ≈ €20,000
• Property tax: €1,200 / year, +2%/year (property tax increase)
• Renovation / maintenance: €3,000 every 5 years
• Equivalent market rent: €900 / month
• augmentation_annuelle_loyer: 2.5%
• Investment rate if renting: 4% net (long-term ETF portfolio)

1. Cost of renting over 20 years

With an initial rent of €900 and 2.5% annual increase:

Total rent ≈ 10,800 × [(1.025²⁰ − 1) / 0.025] ≈ 10,800 × 25.4 ≈ €274,320

As a renter, you can invest the money you don’t tie up in the purchase (down payment, notary fees, difference between rent and mortgage if any). That’s where the investment rate parameter becomes critical in the buy-or-rent.net simulator.

2. Cost of buying over 20 years

Loan amount: 250,000 − 25,000 = €225,000.

Monthly payment for 3.6% over 20 years is roughly €1,325 / month without insurance. Adding borrower insurance (0.3% of initial principal per year ≈ €675/year ≈ €56/month) gives around €1,380 / month.

Over 20 years:

• Mortgage + insurance ≈ 1,380 × 12 × 20 ≈ €331,200
• Notary fees: €20,000
• Property tax: about €1,200 in year 1, +2%/year → roughly 1,200 × 24.3 ≈ €29,160
• Renovation: €3,000 every 5 years → 4 × 3,000 = €12,000

Raw 20-year cost of owning ≈ 331,200 + 20,000 + 29,160 + 12,000 = €392,360.

However, at the end of 20 years you own the property outright. Its value may have increased (market appreciation, energy renovation improving DPE, etc.). In the buy or rent simulator, this final property value is compared to the invested capital accumulated in the renting scenario.

Critical role of the rent increase

Now imagine that in the same scenario, you set augmentation_annuelle_loyer = 0% (rent never rises). Total rent for 20 years becomes simply:

10,800 × 20 = €216,000

Difference compared to a 2.5% increase scenario: 274,320 − 216,000 ≈ €58,320.

In other words, the annual rent increase alone can cost you the equivalent of:

• a substantial down payment, or
• most of your notary fees plus several renovation cycles, or
• many years of property tax.

This is why the augmentation_annuelle_loyer parameter is central in any serious buy or rent analysis.

How rent increases interact with inflation and investment returns

Rent is not the only thing that changes over 20 years. A robust simulator must also account for:

• Annual inflation (erosion of purchasing power)
• Your investment rate if you rent and invest the difference
• Property tax increases (revalorisation taxe foncière)
• Property value appreciation

Nominal vs real rent

If inflation averages 2% per year and your rent also increases by 2% per year, then in real (inflation-adjusted) terms your rent is roughly stable. But in nominal euros, your monthly payment climbs steadily, and that can squeeze your savings capacity.

On buy-or-rent.net, the augmentation_annuelle_loyer parameter is often considered alongside expected inflation and wage growth to test whether long-term renting remains affordable.

Comparing rent growth and investment returns

If your investment rate (say 5–6% net in diversified ETFs) is much higher than augmentation_annuelle_loyer, renting and investing aggressively can make financial sense. But if your investments earn very little (low-yield savings accounts) while your rent grows quickly, renting becomes much more expensive over the long term.

Practical scenarios: how rent growth reshapes buy or rent outcomes

Scenario A: moderate rent growth, strong investments

• Initial rent: €1,000
• augmentation_annuelle_loyer: 1.5%
• Investment rate: 5% net

Over 20 years, cumulative rent is substantial, but if you invest the saved cash (no notary fees, no property tax, no renovation, lower monthly outflow vs mortgage), your portfolio can grow enough to compensate.

In this case, the answer to “buy or rent?” is genuinely ambiguous, and depends heavily on property appreciation, your future plans, and your risk tolerance.

Scenario B: fast rent growth, conservative investments

• Initial rent: €1,000
• augmentation_annuelle_loyer: 3.5%
• Investment rate: 2% net

Here, total rent over 20 years explodes, while your investments barely keep up with inflation. In such an environment, buying often looks much better financially, even after including:

• Notary fees
• Rising property tax
• Borrower insurance and maintenance / renovation
• Possible prepayment penalties if you repay your mortgage early (often capped at 3% of remaining principal or six months of interest)

This is exactly the kind of sensitivity analysis the buy-or-rent.net simulator is designed to run by tweaking a single parameter like augmentation_annuelle_loyer.

Choosing a realistic augmentation_annuelle_loyer value

How should you set the annual rent increase in your simulation?

• Look at local rent index history (IRL, CPI-based rent indices): long-run averages around 1.5–2% per year, but higher in inflation spikes.
• In high-demand cities, sustained increases are more likely, even with some regulation.
• In weaker markets, rents may rise slowly or even stagnate.

Many users test several values for a 15–20 year horizon:

• 1%: optimistic scenario
• 2–2.5%: base case
• 3–3.5%: stress test (high inflation, tight rental market)

The strength of a buy or rent simulator is that you can see how your result flips just by changing augmentation_annuelle_loyer.

Remember the other ownership costs as well

Rent growth is only one side of the equation. When you buy, you must also factor in:

• Notary fees (around 7–8% for older properties, 2–3% for new builds)
• Agency fees (often 3–5% of the purchase price)
• Property tax, which can range from about €450 to over €5,000 per year depending on the city, and tends to rise over time
• Borrower insurance, typically 0.25–0.45% per year of the initial loan amount
• Renovation costs, especially if you improve the energy performance (DPE), which can influence property value and running costs
• Potential prepayment penalties if you refinance or sell early

A proper buy-or-rent.net simulation weighs all of these against your projected rent path driven by augmentation_annuelle_loyer.

No universal answer: it depends on your situation

Even with realistic assumptions for augmentation_annuelle_loyer, there is no one-size-fits-all answer to the buy or rent question. Your decision also depends on:

• Job and location stability
• Family plans and mobility needs
• Risk appetite (stock market vs real estate leverage)
• Access to credit and down payment
• Preference for flexibility vs security of ownership

This article is for educational purposes only and does not constitute personalized financial advice.

Conclusion: rent increases are too important to ignore

Over 20 years, moving from 0% to 2–3% annual rent growth can easily add €50,000–€60,000 to your total rent bill. That’s enough to change the outcome of many buy or rent comparisons.

However, the best choice between buying and renting always depends on your specific numbers and goals. The only way to see the real impact of augmentation_annuelle_loyer in your case (current rent, city, savings capacity, mortgage conditions) is to model it.

Test different rent increase assumptions and see how your long-term picture changes: Simulate your situation on buy-or-rent.net.