The positives of renting
- Financial institutions are offering an 80% mortgage loan and many cannot afford it and renting is the viable alternative.
- Renting gives you flexibility to move easily
- You are not responsible for the costs of maintenance
- You can rent in an area you may not afford to purchase
- You will have extra savings to invest elsewhere or even go travelling
The positives of buying a home
- Great investment – mortgage repayment accumulate to long term wealth
- Being a homeowner give you stability as you won’t have to move if the lease is not renewed
- You’ll be able to make improvements to the home and reap the benefits if you choose to sell
Negatives of renting
- You are paying someone else’s mortgage
- The Landlord may not renew the lease and you may be paying removal costs sooner than you think
- You need permission to make alterations to the property even if you want to hang a picture on the wall
Negatives of buying a home
- You have to pay council rates and water rates
- You will have upfront cost like stamp duty, building and pest inspection and insurance.
- You might not be able to find a property in a good area that suits all your requirements
- It’s more difficult to relocate
- Repairs are at your own cost
- Furnishing the home will be at your own cost
Regardless of the big-picture that affect homeownership, determining whether and when to purchase a home is a personal choice that demands careful deliberation.
On face value it is cheaper to rent than to purchase. However an investor or home buyer is looking at capital growth and when this is factored in a different picture emerges. In West Perth as can be seen in the following table, over the last 10 years a person renting would be better off. However in a 15 year period it is marginally better to own your own apartment (+$123,520) and over 20 years the advantage is even greater (+$178,992). Note this does not factor in the buying and selling costs or varying interest rates or inflation.
Compare this to a house in Hillarys
Again over the last 10 years a person renting would be better off than a buyer. However over 15 years a buyer would be ahead by $203,334 and even more ($314,723) over 19 years. In summary, it all depends on the property cycle and where the buyer/renter is in the cycle. Other factors contributing are lifestyle, work and one’s personal financial situation. Generally you will benefit from purchasing if you keep the property for longer than 10 years.
Statistics taken from REIWA.