Nearly half of all Australian first home buyers entered the property market in a bid to get off the revolving rental train, new research has revealed.
According to Mortgage Choice and Core Data's Evolving Great Australian Dream report, for 48.8% of first home buyers, not paying rent was the key motivator for getting onto the property ladder.
And while renting can often be a cheaper alternative to buying a home, the money a person spends on rent is only going towards someone else's mortgage, rather than a tangible asset that they own.
As a general example, if a borrower was to buy a median-priced house in Melbourne for $620,000* and borrow 80% of the property price, their monthly repayments on a 30-year, P&I home loan with an interest rate of 3.79% p.a., would roughly be $2,308.
Meanwhile, data from CoreLogic shows the median rental price for a house in Melbourne is $400 a week, or approximately $1,730 a month.
So, in this example, for an extra $578 a month, a borrower could own a property and be using their income to build a portfolio of assets.
Of course, when all is said and done there is no right or wrong decision when it comes to buying and owning property versus renting. It all comes down to your personal circumstances and what you feel comfortable with.
According to the research from the report some of the other reasons why first home buyers chose to buy property included: being able to afford it (30.9%), reaching a certain age (28.5%), having children (18.7%), and finding the right place (18.7%).
Property is generally a long-term investment that can potentially help future-proof your wealth. And while some borrowers (specifically first home buyers) may not be able to buy in their desired area, once they are on the ladder, it can be easier to grow wealth and upgrade into a better home down the track.
Over the past few years, we've seen a growing proportion of first home buyers purchase an investment property before an owner occupied dwelling.
According to the 2016 First Home Buyer Survey, 40% of first home buyers purchased an investment property before and owner occupied dwelling. Why?
Well, according to the first home buyers, they liked the idea of getting their foot on the property ladder and purchasing property in an affordable area, while still choosing to live in their desired location.
This type of property investment is commonly referred to as ‘rent-vesting' and it's a great option for home buyers wanting to enjoy the benefits of home ownership, while living where they prefer.
At the end of the day, regardless of whether you choose to rent, buy an investment property or a home to live in, you have to ensure you are making the right financial decision for your needs – both now and into the future.
It's important to always seek the advice and expertise of a qualified professional before you making major property purchasing decisions.
*March 2017, Mortgage Choice and Core Data's Evolving Great Australian Dream report