Given the current state of the Australian property market, it’s understandable that many people are weighing up whether buying vs renting is the better choice.
As home prices continue to soar in metropolitan areas, inner city hubs, suburban fringes and even rural areas, purchasing a property is simply out of reach for many people, particularly Millennials and the younger generations. However, it’s these same generations who are particularly fond of the lifestyle that living in the big smoke brings, which is naturally where the more expensive properties are usually found.
As a result, when comparing the pros and cons linked to buying vs renting, it’s easy to understand why many Australians are turning their backs on the ‘Great Australian Dream’ of home ownership in favour of sticking with being a tenant – but is adopting this philosophy really a good idea in the long term?
Comparing Buying vs Renting In Australia
According to recent data released by RealEstate.com, it’s currently cheaper to buy a house than rent one based on 56.8% of dwellings located in Australia. Despite surging property prices, we can thank record low interest rates for this current costings estimate, with the swing even higher for units and apartments.
The analysis shows 51.2% of houses in Australia will be cheaper to buy than rent over the next decade, which is considered to be the average time period that homeowners hold on to their properties. The results were even higher for units, with 72.7% cheaper to purchase over the same time period.
The figures compare the total costs of buying vs renting, which for buyers includes mortgage repayments, stamp duty, selling costs and ongoing costs such as maintenance and strata or council rates.
However, this is also based on the assumption that the buyers have the required 20% deposit to access a home loan without paying for Lenders Mortgage Insurance. With the cost of living in Australia rising each day, this is arguably the biggest hurdle that many first home buyers face when it comes to getting their foot in the door of the property market.
Making a dedicated savings plan to buy a home can very much drain the ‘fun’ out of your day to day life. If you don’t have this to worry about and your rent is reasonably affordable, renting can work out to be less expensive and more lifestyle friendly if you’re an inner city dweller who prefers to reside in the thick of it. Provided you are aware of your lease term and obligations, renting allows you to pick up and move to a new home with far less paperwork and overall costs, without being liable for any of the maintenance of the properties.
However, if you were to pay off a mortgage, all that money poured in over the years is yours. If you are patient enough to wait twenty or thirty years, your home will no doubt become your greatest financial asset, and can put you in the financial position to buy another via equity. In comparison, renters are paying off someone else’s home, and miss out on the potential investment and wealth generation opportunities in the long run.
Renters are often the first to feel the crunches of property market changes. Your landlord or property manager may undertake evaluations, sell the property or increase the price of your rent – and that’s not forgetting the general inconvenience of regular inspections, and being unable to make any cosmetic or structural changes to the residence. In comparison, those that physically live in the home that they’ve purchased have much greater freedoms and safety when it comes to long term stability.
If you’re weighing up whether buying vs renting is right for you, it usually all boils down to your own financial and personal circumstances. However, it’s also worth noting that there’s now a third option on the table to consider: rentvesting. In a nutshell, this term is used to describe a modern home ownership strategy, in which consumers rent a property to live in that’s in line with their lifestyle, but they own an investment property that’s in line with their budget. While they are technically home owners, their abode is not something – or somewhere – that they would like to live in themselves.
One of the primary drawcards of the rentvesting phenomenon in Australia is that it allows consumers to break into the property market sooner with a smaller deposit, as opposed to waiting several years until you are able to afford your dream home. For younger generations, this is becoming increasingly attractive, as the cost of living continues to rise, which in turn makes saving up for a house deposit increasingly difficult. While this concept allows consumers to get their foot onto the property ladder, it doesn’t mean sacrificing the lifestyle preferences or moving to a region that isn’t suited to your job or personal taste.
Taking The Stress Out Of Your First Property Purchase
The big attraction of buying your own home is just that – it’s yours, once you’ve paid back the banks of course. Apart from having somewhere to live, the quest for home ownership is also about having a long term investment strategy. If we’re looking at it from the viewpoint of decades instead of months, generally house prices do rise, and so does the value of your investment.
Buying your first property is also one of the first steps of building wealth, as the equity in the home will usually allow you the opportunity to access further loans if that’s what’s on your radar, such as shares, a managed fund, or even a second investment property. However, entering the market as a first home buyer isn’t always easy, which is why we’ve compiled our very own in depth First Home Buyers Guide. This resource is completely free to download, and can be a game changer when it comes to ensuring that you’re up to speed on how to get into your first home faster.
With a background in banking, finance, business development and project management, there’s no better advocate to have on your team than Nikki Berzin. As a fully qualified mortgage broker and director of Cherry Lending & Finance, Nikki is passionate about all things finance, and empowering her clients with the tools to hit their property goals is what she does best, and another example of this is the free to use Savings Goal Calculator found on the Cherry Lending & Finance website.
If you’re looking to get into your first home, purchase an investment property or even want to look at your options for refinancing, the first step is starting the conversation. Get in touch with Nikki today, or call her directly on 0427 374 155 to bring your mortgage dreams to life.
Disclaimer: Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product. Subject to lenders terms and conditions, fees and charges and eligibility apply.
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