Is it cheaper to buy than rent?
It’s a question that many young Australians ask themselves – should I buy property, or continue renting? Owning your own home may be a part of the Australian dream, but with high property prices in most capital cities, it simply isn’t feasible for a lot of people.
But is renting just as expensive? The current median rental value in Australia is $440 per week. Surprisingly to some, many properties across the country (33.9%) have estimated mortgage repayments of less than this.
This does not, however, mean that it’s cheaper to buy than it is to rent. When considering your own personal circumstances, it’s less important to look at average costs across the nation and instead focus on the situation in your own city or region.
Advantages and disadvantages of renting
For many people, renting the house they live in is a great option. It gives you more flexibility to live where you want, allowing people with lower incomes to live in the inner city where there are usually more jobs and better liveability. You can move house as often as you like when renting, making it easier to pursue opportunities. Renters don’t need to save up for a big deposit, and they save money on home maintenance and repairs.
The disadvantage is that your rent money isn’t getting you any closer to home ownership. Rent prices can be unstable in a competitive market, and can go up and become unaffordable, forcing you to move.
Advantages and disadvantages of buying
When you buy property, your mortgage repayments are gradually contributing to your ownership of an asset that should grow in value over time. If you are able to keep your property for the long term, it will normally be worth more when it comes time for you to sell.
Owning a home is an investment in your financial future; getting on the property ladder by purchasing your first home makes it easier to buy property again. Your home is your own to make alterations as you like – so you’re never stuck with that ugly kitchen or dysfunctional bathroom set up. And with interest rates at historic lows at the moment, paying a mortgage is easier than ever.
However, while interest rates may be low, property prices in many parts of the country are not. You may not be able to afford to live in your ideal suburb and so you could end up compromising on location. There are other hidden costs associated with home purchasing and ownership that you need to take into account, such as conveyancing fees, building inspections, bills and maintenance costs. Finally, saving up enough for the initial deposit on a home can be difficult and take many years.
In the end, it’s impossible to definitively say that renting or buying is cheaper. While buying property is a good investment for the future, the deposit required to secure your first home can be unachievable for some people. Renting can be a much better option both for your finances and your lifestyle.