Category: House & Home
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Sub category: Buy
28 January 2016

Rent v buy – what’s the best option?

A recent ING DIRECT survey found almost 90% of property owners believe owning rather than renting makes better financial sense – and close to 70% of renters agree.

It’s a question on the lips of many first-time buyers: is it better to rent or buy?

While in recent years we have seen the rise of so-called ‘generation rent’ – a reflection of the challenges facing young Australians who want to get on the housing ladder – an ING DIRECT survey (2015) highlights how the vast majority of Australians still believe there are benefits to property ownership.

Potential benefits of buying

  • For starters, home ownership provides psychological security. There is no landlord to tell you to move out; you can decorate, renovate and even redesign your home to suit personal taste. And for families in particular, a home forms the central hub of a personal community.
  • Overarching these emotionally-driven benefits, home ownership could leave us financially better off than renting over time. As a guide, ING DIRECT research (2015) found that 86% of property owners believe owning rather than renting is a better financial choice, and 67% of renters agreed.
  • Perhaps the most significant financial plus of property ownership is the potential to earn decent long term returns. According to figures from research group CoreLogic (Q3 2015), dwelling values across Australia’s combined state capitals have risen by an average of 5.7% annually over past 10 years. For property owners in our most expensive cities like Sydney and Melbourne, these gains can translate into hundreds of thousands of dollars, meaning property ownership could deliver a substantial boost to personal wealth.

Owning property brings additional responsibility

On the flipside, property ownership comes with a range of ongoing costs.

  • While renters are expected to maintain a leased property in reasonable condition, they are free from the fiscal responsibility of paying for repairs, rates, strata levies, insurance and all the other costs that go hand in hand with property ownership.
  • Property owners on the other hand also wear the cost of regular home loan repayments. However, it’s worth pointing out that these payments are a form of forced saving – after all, renters are required to make regular rent payments too and ultimately, both parties are paying off an appreciating asset. The difference is that property owners are paying off their own asset.

The long term gains point to owning

Yes, there are arguments for renting. It carries less responsibility; it doesn’t involve the commitment of a home loan, and renting offers the freedom and flexibility to move around according to personal preference, career demands or family choice.

But when it comes to financial pluses, many Australians think owning a property – either as an owner occupier or a landlord – comes up trumps over time.

Data from CoreLogic RP Data Hedonic Home Value Index, September 2015 Results Released: Thursday, October 1, 2015

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