Could it be cheaper to rent than buy?
According to ABS Data, the average loan size for all owner occupied housing commitments is: $357,2001.
The average standard variable rate of our lender panel is currently 4.93%. As such, the average weekly mortgage repayments are: $439. According to RP Data, the average median rent is: $3762.
According to these statistics, repaying a mortgage costs about the same as the average national rent – the only difference being once you have paid off the mortgage, the property is yours.
Renting versus buying - pros and cons
The pros of renting
- Allows you to live where you want
- You don’t need a huge deposit to start renting
- You can move as often as you like/need
- You don’t have to pay for maintenance/repairs
The cons of renting
- You’re spending money on something that isn’t yours
- With low vacancy rates, you can face stiff competition
- In a competitive market, landlords are able to increase rent as they wish
- There’s no certainty around rental payments
The pros of buying
- You spend money on an asset that grows in value over time
- A property is a lucrative asset - values climbed 2.4% in the 12 months to June 2016 across the combined capital cities3
- Owning a home puts you in a good financial position for the future
- You are able to make repairs, alterations to the property and truly make it your own
- Interest rates are at historical lows
- Australia’s lenders are aggressively competing for business – they want to finance your property dreams at a good interest rate
The cons of buying
- You're spending money on something that isn’t yours
- Purchasing the property isn't the only expense - consider maintenance fees, bills & repairs
- With property values surging, you may be forced to buy where you can afford and not ideally where you’d like to live
- Costs associated with buying a property can be significant – Lenders Mortgage Insurance, solicitor’s fees, conveyancing fees, pest and building inspections
- Buying a property requires a significant deposit, which may take years and considerable sacrifices
1Data from ABS Housing Finance Data – Feb 2016
2Data taken from RP Data’s Quarterly Rental Report – June 2016
3Source CoreLogic RP Data