To rent or to buy? That is the question many of us face, particularly if you’re new to the property market. While buying your own home has long been considered the ‘Australian Dream’, renting can offer a lifestyle embodying the elements of flexibility and freedom.
To settle this debate, we have narrowed down the pros and the cons of each to help you decide.
Moving to a rental property is typically a much quicker process than buying a property. The last thing a landlord wants in renting out their property is for it to stand there for weeks or months, vacant, so generally they’ll push for a tenant to enter a leasing agreement as soon as the property has been vacated. This can be great if you’re looking for a quick turnaround. Renting is also generally considered, cheaper than buying. With minimal upfront and ongoing costs, this can enable you to free up a bit of cash to diversify your investments outside the property market, or save for the future while also reducing significant financial stress. With this said, it can also mean that you can afford to live in a suburb or property that you love, but may not be able to afford to buy into. The transactions in renting a property are also far simpler. All you normally have to worry about is your bond lodgement, rental payments, and utility bills, without having to take on board other more significant payments associated with owning a property. Housing requirements can change rapidly throughout a person’s life. If your family or your income grows, you have the flexibility to move at a far quicker pace, with less hassle, to something more convenient.
While it seems generally renting can save you a lot of money and time, this is very much dependent on the impending and current market conditions, and sometimes monthly rental payments can exceed average mortgage repayments for comparable properties. This changing property market can also mean that weekly rental prices can be unpredictable at times, particularly as even current rental payments can change as soon as you hit the 6 month mark of your lease term. Repainting, renovating and revamping your property is something that can help make a place really feel like a home. However, even hanging pictures on the wall can quickly become complicated through requesting permission from the landlord/property manager, which can often be denied. While some people may pay off their mortgage, rental payments are forever and these payments are essentially contributing to someone else’s mortgage repayments or investment income, meaning there is absolutely no investment potential here.
Having the freedom to put your own stamp on your home is very exciting and freeing, and for some is the biggest bonus of purchasing your own home. Generally (unless in a strata), there are very little complications surrounding internal renovations of your home. Financially, sometimes you are better off purchasing than renting too. The discipline of mortgage repayments is one way to force you to save money by putting it into your home loan instead of spending it. Purchasing a property can give you a stronger sense of security, as you aren’t usually at risk of having to move due to an agreement finishing or your rent becoming unaffordable. While interest rates do go up, a mortgage gives you some certainty and the ability to budget for repayments, particularly if you opt for a fixed-rate. Wealth creation is probably the most significant benefit of buying a home. Seeing your investment go up in value after having only purchased it a few years prior, just because the market demand has gone up.
While generally purchasing a home is considered a solid investment and wealth creator in the long-run, there is the possibility that your property may decrease in value, or remain the same. This has a lot to do with the overall strength of the market at the time of selling, so choosing the right market to sell your property, being realistic in your price expectations and doing your research, is incredibly important. However, with this said, encouraging the purchase of a property with mortgage repayments you cannot really afford, can increase your foreclosure and repossession risk if you fail to make these repayments. Large upfront costs such as stamp duty, a deposit, government fees, conveyancing costs, and loan establishment fees, as well as ongoing costs such as maintenance, council rates, water rates, utility bills, and strata levies (if applicable), quickly add up and can result in extreme financial hardship or stress, if unaffordable.
Overall, there are significant costs, and significant benefits associated with both buying and renting. It can be a complicated and lengthy process to unpack, but is essential for any renter or buyer to understand when entering the market. If you’re looking for further advice or information, please feel free to contact us at ART OF REAL ESTATE today:
(08) 6168 7471
hello@artofrealestate.com.au