- It is cheaper to buy than rent in some areas
- Buying gives you stability and potential long-term price growth, but also means additional costs and risk of property fluctuations
- Renting may be cheaper in some areas and carries less responsibility, but can mean missing out on potential price growth and has less stability
It’s cheaper to buy than rent for 6.0% of houses and 22.8% of units across Australia, according to recent research from Domain.
Domain compared mortgage repayments to rents across thousands of suburbs nationally, and assumed buyers would contribute a 20% deposit and pay an interest rate of 5.68%.
If rates keep falling, that should lead to an increase in the share of homes that are cheaper to buy than rent.
But while the cost of home loan repayments and rents are vital considerations for anyone who’s thinking about buying a property – they’re not the only things to bear in mind.
Pros and cons of buying
Buying gives you the chance to build long-term wealth through capital growth. Over time, property has generally increased in value, which has helped many Australians grow their personal net worth. Owning your home also provides security – you don’t have to worry about being forced to move if a landlord decides to sell, and you can renovate or improve the property as you wish.
On the other hand, buying is a major financial commitment. You’ll need to cover upfront costs such as stamp duty, legal fees and moving expenses, and ongoing costs like maintenance, insurance and council rates. Also, property prices can fluctuate, which means there’s a risk the value of your property might decline.
Pros and cons of renting
Renting is a more flexible option, particularly if you’re not sure where you want to live long-term. It often allows you to live in a location you might not be able to afford to buy into, and you don’t have to worry about rates, repairs or major upkeep.
However, renting means you’re paying off someone else’s mortgage rather than building equity in your own home. Unlike owning, renting doesn’t give you an asset that could increase in value over time. Furthermore, you also have less certainty and control, as your lease may not be renewed or your rent may rise.
Weighing up which is right for you
Buying a property – whether to live in or for investment purposes – isn’t suitable for everyone, but it has delivered considerable benefit for millions of Australians over the years.
The right option can depend on the market in area you want to live in, how much deposit you have saved and the importance of security for knowing your home is your own.
Your Loan Market broker can run the numbers for you to determine whether it is cheaper to buy or rent in your area, and walk you through your options.
