The concept of “rent is dead money” has been drilled into most of us since birth, but is it cheaper to rent or buy a house in Australia given the current market?
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.
However, just because it’s cheaper to buy on paper at the moment, doesn’t necessarily mean that this is the case across the nation. If you’re an inner city dweller, then the sheer cost of saving for a deposit alone is enough to deter some residents, who in turn actually prefer renting.
In the same breath, it’s also not uncommon for buyers to purchase property in entirely different states to where they live. Should you prefer living in Sydney but can’t quite afford to buy a property there, why not buy a home in regional Queensland, rent it out, and use the income to supplement the price of your own rental?
Should You Rent Or Buy A House This Year?
Needless to say, the question of whether it’s cheaper to rent or buy a house has complex answers, and usually vary depending on your own individual circumstances. Both options have extensive pro’s and con’s, and shouldn’t be approached with a “one size fits all” viewpoint.
As Victorians and New South Welshmen flock north to escape lockdowns and winter, an example of a tough rental market for tenants is Queensland. The only exception to this is usually inner city apartments, which are now over saturated thanks to the notable absence of international students.
Nevertheless, some people actively choose to rent to maintain a lifestyle. Forget about scrimping and saving for a home loan deposit, as renters can instead redistribute those funds elsewhere. The other significant perk is flexibility – Hate your neighbours? Move. Need a home office? Move. Want a bigger yard? Move. Providing 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. Maintaining the property in the long term is also not the problem of tenants.
However, if you were to pay off a mortgage, all that money poured in is yours. If you are patient enough to wait a few years, your home will in turn become your greatest financial asset. Renters are paying off someone else’s home, and in turn are also limited with what they can and can’t do to the property, such as painting a wall or even owning pets. Renters are also often the ones that feel the crunches of property market changes, as your landlord or property manager may undertake evaluations, sell the property or increase the price of your rent (limited to once every six months in Queensland).
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.
Unsurprisingly, most Australians don’t have a spare $500, 000 lying around in cash, which is where the mortgage process comes in. If you’re borrowing money, you have to pay interest. Monitoring fluctuations is paramount, as it could add anywhere between 3-6% on top of your loan value. Saving the 20% deposit required to even get a pre-approval can take years, which is why some Aussies shy away from owning a home all together – either by making a conscious choice, or being simply unable to afford it.
Owning a home involves far more than just paying your mortgage every month. Let’s not forget about bank fees, council rates, insurance, body corporate fees – and that’s not even covering the costs associated with actually buying or selling a home (add 4-6% for things like legal fees, inspections, stamp duty etc). Owning a home and having a mortgage is one of the biggest financial responsibilities that anyone can face during their lifetime. If you don’t pay your rent, you’ll get evicted and blacklisted. Don’t pay your mortgage? Your home will get repossessed, and you’ll be stuck with a very damaging mark on your credit file.
While home ownership offers potentially big payoffs, it also involves bigger financial risks. If you’re questioning as to whether it’s cheaper to rent or buy a house, be sure you’ve done your research as to what you can and can’t afford for both upfront and ongoing costs, along with working out both your short term and long term financial goals.
Get The Right Help With A Reputable Property Advisor
A completely free service, Emergency Services Property Advisors provide property advisor services to Police, Fire, Ambulance and S.E.S personnel and their families right across Victoria.
Luke and the team at ESPA are passionate about providing support to some of Australia’s most valued public servants, and aim to provide tangible real estate advice to those in stressful positions with crazy hours at no extra cost to them. Along with key industry insights, ESPA also works with a broad range of service providers linked to the real estate industry such as conveyancers, trades, legal practitioners and mortgage brokers.
If you are an emergency services worker looking to potentially buy or sell property in the future, please get in touch with Emergency Services Property Advisors today to discuss how we can turn your real estate dreams into reality, or call Luke directly on 0414 757 705.
