Buying a home is one of life’s important milestones. With 70 per cent of Australians currently owning a home, most people aspire to homeownership, but it’s also something that has become harder to obtain. Not only are first homebuyers being locked out of the market in many capital cities, often other circumstances mean that renting remains the better option – at least for the time being.
Templeton Property and many other property managers have broad mix of clients who both buy and rent, each with their own unique circumstances and are able to provide advice for both. Here’s how to decide which is the best for you.
Reasons to Rent
1. Lifestyle Factors
For many, renting allows you to live a certain lifestyle. Whether it’s living close to the beach or in the inner city, it’s no secret that it’s more affordable to live in trendy suburbs as a renter than a homeowner. Because location is a major factor in deciding where to live, if being able to cycle or walk to work, or be within close reach of restaurants, bars or the beach is important, renting may be the better option to live in your location of choice.
When you rent you are not tied down to live in any specific location. If you’re the type of person who is always looking for the new experiences, including overseas travel, renting offers the flexibility to reassess your plans at the end of each lease period. It also means you are spared from any maintenance costs of owning a property, including interest rate hikes.
Compared to most mortgage repayments, renting is the more affordable option. Not only are you shielded from rate rises, but the costs of repairing plumbing, roofing or electrical fixtures around the home becomes the responsibility of the owner. Many renters are able to put extra funds into a high interest savings account, giving them the option to invest in property or shares at a later date.
Reasons to Buy
1. Create Equity and Financial Security
Paying a mortgage is a form of forced savings, and builds personal wealth by creating equity. Even if you have to sell later on, you have to pay for accommodation somewhere, and this equity will put you financially ahead of renters. Even though interests rates often rise, repayments will decrease over time, whereas rent costs will typically only increase. Eventually you will have paid off the mortgage, but you’ll never stop paying rent. In the long term, owning real estate usually puts homeowners in a better financial position compared to renters who haven’t saved.
2. Additional Security
Rental laws in Australia favour landlords, meaning that renters may be required to vacate the property with little notice. On the other hand, homeownership provides security, which can be particular important for families and those with pets. Having this additional certainty can be a big reason for many to take the property plunge and by their own home.
3.Control Over the Property
When you own the home, you have the luxury of making it yours anyway you like. This means you can hang pictures on any wall, repaint the home and changing the décor as you see fit. If you own the home, any improvements that you make are likely to add value, but as a renter, instead of benefiting you, they will benefit the landlord, making paying for improvements impractical.
Ultimately the major factor whether it makes more sense to rent or buy is your financial position and how much you can afford allocate each week to your accommodation expenses. If you can’t afford to buy yet, it’s not worth fretting over. It is however, always smart to save as much as possible to open as many investment options as you can for down the track.