To Buy or Rent?
Everyone has an opinion on whether renting or buying property is the better option, but ultimately it is only your own personal circumstances, aspirations and financial situation that can determine this. The property market has changed a lot over the years and for many of the younger generations, the prospect of purchasing a home early in life has seemed unachievable. Recent fluctuations in the market, including record-low interest rates and government stimulus, have brought fresh perspective to the historic debate of owning versus leasing.
Here we have broken down the simple positives and negatives of renting and buying to assist you in making an informed choice as to which option may be best for you…
There are a diverse range of demographics that choose to rent, from young people just starting out, to travelling professionals who require the freedom to relocate. It is a common misconception that those who rent cannot afford to buy, when in reality there are a myriad of reasons why some choose to rent as oppose to purchasing.
- Flexibility – Renting offers you the flexibility to relocate without consequence at the end of each lease if your circumstances change. It also affords you the opportunity to live in an area or suburb that you may not necessarily have been able to purchase in.
- Responsibility – When renting, you have diminished responsibility compared to that of a homeowner, avoiding duties such as property maintenance, repairs and landscaping.
- Affordability – Renters are not responsible for the ongoing costs of a property including council rates, maintenance costs, body corporate and interest on mortgage repayments.
- Unpredictability – You are at the mercy of your landlord when renting as they may suddenly decide to sell their property, increase the rent or want to move back in themselves, leaving you with less security around your accommodation.
- Security –Often referred to as ‘dead money’, when you are renting you are essentially paying off someone else’s mortgage. There are no ‘forced saving’ as such, making it difficult to establish financial security.
- Creativity – You cannot update, renovate or decorate a rental property in the way you could if it were your own home, limiting your ability to personalise your living space.
Long considered the ‘Australian Dream’, owning a home is an accomplishment within itself. Purchasing property can provide financial security for your future and be a successful long term investment strategy. Government stimulus such as the homebuilder’s grant and first-home buyer incentives, in conjunction with current low interest rates have improved the ability for Australians to purchase a property.
- Equity – You can use the equity you acquire by paying off your mortgage on other investments, allowing you to grow your investment portfolio.
- Versatility – Owning your home allows you to decorate and renovate as you please, giving you full creative license over the appearance and design of your property.
- Stability – Being a homeowner provides a sense of security and certainty as there is no chance of being displaced by your landlord.
- Capacity – If you have your money tied up in a property, it often means that you are unable to take advantage of other opportunities that may lead to quicker or greater returns.
- Maintainability – Purchasing a home is a long-term commitment to make a certain level of repayments, which can become a struggle if your financial circumstances change. The ongoing costs associated with owning add up quickly, including insurance, repairs, rates and maintenance.
- Diversity – Owning your home is not only a financial commitment, but an obligation that will no longer allow you to make quick decisions regarding moving or lifestyle changes.
Affordable lending conditions are urging renters to run the sums and figure out if buying may be a more viable and lucrative option for them. If you find yourself in a position to purchase (e.g you have a substantial deposit/have been approved for a loan) keep in mind that there are still many factors to take into consideration. Deciding to rent or buy will depend on various influences such as the age, type and location of the property. Consider the ongoing costs of each option and seek professional advice from a mortgage broker to assist you in making an informed decision.