Renting vs buying, which is the best option?
Becoming a home owner has always been the dream of most Australians and what most people strive towards, however as property prices increase that dream is becoming more and more out of reach for a lot of people. There is about 67% (or 5.4 million) households being owner-occupied, the remaining 33% being renters which is either by choice or out of necessity.
Back in the mid-1990’s housing values were less than 3 times the disposable household income compared to now where it is more than 5.5 times disposable household incomes. With property prices continuing to grow compared to low wage growth, it is expected for the gap to continue to widen.
Tamara Vawdrey
Financial Planner
With property prices growing at such a remarkable rate it is going to be more challenging than ever before for first home owners to enter into the market without having the equity of other property supporting them and, in some cases, even with access to the “Bank of Mum and Dad” it is still difficult to enter into the market.
With property prices growing, potential buyers are needing to have an even higher deposit to avoid Lenders Mortgage Insurance (LMI). This is made even more difficult with low interest rates in savings accounts so savers are just relying on their own contributions if they aren’t willing to risk their savings in options such as the share-market.
On the other hand there are definitely upsides to renting, it is generally more affordable without having to pay the extra costs such as council rates or house insurance and it also gives you more flexibility in being able to locate from area to area.
Other upsides are that it frees up your savings to do things you enjoy such as traveling or even gives you the option to diversify your investment portfolio by not having all your wealth in the family home.
It’s not a simple yes/no answer to whether buying a home is the best option for yourself, every person has a different situation and are in a different stage of their lives so if you are questioning what you should be doing and what your next move is, please contact our office and book an appointment with one of our Financial Planners to discuss your individual situation.
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