The age-old question of whether it’s better renting or buying a home has been a topic of debate across the world, and Australia is no exception. And it’s a question that often takes people by surprise. So, is it better to rent or buy? In the past, buying was deemed the better option. These days, however, with the successive hikes in the cash rate since May of 2022, it has been noted that renting may be cheaper than buying, but with many caveats.
The local real estate market has witnessed its fair share of fluctuations, even more so these last few years post-COVID. This leaves potential homeowners and renters with thoughts of the financial implications of their renting or home-buying decisions.
This article will delve into the factors that determine whether buying a home is cheaper than renting. It will also show you why, in most cases, it’s cheaper and better to buy than it is to rent.
Factors Affecting the Cost of Buying Vs Renting
Now, while it can be said that these days, it’s cheaper to rent than it is to buy, you should be aware of the limitations that come with this statement. When you think about whether it’s better renting or better buying, you have to consider the biggest factor that affects the price – location.
In the past couple of years, it was determined that a lot of suburban locations have homes that are cheaper to buy than rent. This trend has reversed of late and now, the number of suburbs where buying vs renting is better has reduced dramatically. It has now been deemed by CoreLogic’s research that renting is now cheaper than buying in approximately 90% of the country’s suburbs.
This means, however, that there are still places in the county where owning a home is better for your pocket than renting. In Queensland, it has been noted that there are approximately 70 locations where it’s NOT better renting as it is buying. In short, there are still lots of locations in QLD where you can benefit more from buying a home rather than renting one.
Is It Truly Better Renting or Buying?
Buying and renting both come with pros and cons, so it’s important to sit down and review all the facts before you come to any kind of decision. To help you compare renting vs owning, here are some of the pros and cons associated with each option:
Renting a Home
- Flexibility – Provides greater flexibility in terms of changing locations. This is ideal for individuals who need to relocate frequently for work or personal reasons.
- Lower Upfront Costs – Requires lower upfront costs compared to buying. There’s no need for a large deposit or the associated costs of purchasing a property.
- Maintenance and Repairs – Landlords are responsible for most maintenance and repair issues, saving renters from unexpected expenses and the hassle of upkeep.
- Less Financial Risk – Property values can fluctuate, but renters aren’t as directly affected by market changes. They can avoid potential losses if property values decrease.
- Amenities and Shared Facilities – Many rental properties offer amenities like pools, gyms, and communal areas, which may be costly to own and maintain.
- Limited Control – Limited control over the property. Renters may need permission for modifications, and the landlord can decide to sell or terminate the lease.
- Lack of Equity – Unlike homeowners, renters don’t build equity over time. Rental payments contribute solely to the accommodation without potential long-term financial gains.
- Rent Increases – Landlords can raise rents after the lease term, potentially leading to higher living costs and decreased affordability.
- Uncertain Tenure – Rental agreements are typically shorter-term than owning a home, leading to less stability and the potential for more frequent moves.
- Limited Personalisation – Renters may be restricted in customising their living space according to their preferences and needs.
Buying a Home
- Equity Building – Allows you to build equity over time. As you make mortgage payments, you gradually own a larger share of the property, potentially leading to substantial wealth accumulation.
- Stability and Control – Get stability and a sense of control over your living space. You have the freedom to customise, renovate, and make modifications according to your preferences and needs.
- Long-Term Investment – Real estate has historically appreciated over time, offering the potential for long-term financial gains. Property value appreciation can contribute significantly to your net worth.
- Predictable Costs – With a fixed-rate mortgage, your monthly mortgage payments remain stable over part of the loan’s term, providing better budgeting and financial predictability at the beginning of your loan repayment cycle.
- Asset Ownership – Property is an asset that can be passed down through generations, offering a legacy for your family.
- High Initial Costs – Buying a home may require a substantial upfront investment, including a deposit, legal fees, and stamp duty, which can strain your finances initially.
- Market Fluctuations – Property values can fluctuate due to market conditions, affecting the potential resale value of your home if you are wanting to sell when properties are on a downward trend.
- Maintenance Responsibilities – Homeowners are responsible for maintenance and repair costs, which can sometimes be unexpected and expensive.
- Limited Flexibility – Owning a home can tie you down to a specific location, potentially affecting your ability to relocate for work or personal reasons.
- Illiquidity – Real estate is not as liquid as other investments. Selling a property can take time, and you might not be able to access the funds quickly.
- Interest Rate Risk – If you have a variable-rate mortgage, changes in interest rates can impact your monthly mortgage payments, potentially leading to financial strain.
Why It’s Wiser to Buy Than to Rent
While some people insist that it’s better renting than buying, opting to buy a home rather than rent one can often be a wiser financial decision. While both choices have their merits, buying offers a range of advantages that can lead to long-term benefits. By purchasing a property, individuals have the opportunity to build equity over time, effectively investing in their future.
Property values also tend to appreciate, providing you with the potential for increased wealth and financial stability. Homeownership can also provide a sense of stability and control over one’s living environment, allowing for personalisation and modification. Add to this list the predictable mortgage payments, and the potential for a valuable asset, and the choice to buy a home seems a more secure and prosperous path forward.
Work With a Professional Lending Solutions Mortgage Broker
Seeing a mortgage broker when you’re thinking of buying a home is a good move. Aside from being knowledgeable experts who facilitate the loan process, they can also become your trusted ally when it comes to finding the best lender for your needs.
Professional Lending Solutions mortgage brokers have the inside knowledge on the wide range of mortgage products available in the market. Such knowledge allows them to tailor these to match your unique needs and financial goals.
A mortgage broker works in your best interest and will analyse your financial situation and preferences. This will help in finding you the most suitable loan terms, interest rates, and repayment options. Armed with a comprehensive understanding of the industry, PLS mortgage brokers will provide you with valuable insights to help you make informed decisions.
If you want to learn more about buying a home on the Gold Coast and finding out what home loan products would suit your needs, contact Phil and the team at Professional Lending Solutions today.