The news headline jumped at me as I was mindlessly scrolling my Apple News feed whilst sipping my early morning coffee – ‘Aussie single mum forced to pay $11,000 after facing 40th rental move.’
The article went on to talk about this lady who was given three months to move out of her rental unit where she was living for the past nine months with her two teenage kids. The woman was an ideal tenant, paid her rent on time and had a steady job, yet, she lived a life of uncertainty, struggling to have a decent rental home, instead of having to move every time the landlord decides to hike up the rent in a market that has gone crazy of late. Sharon’s case, unfortunately, is just one of a hundred such stories of renters who face strong headwinds and are struggling to find a decent place to call home, or if already renting, with the rising rents, in addition to all several other financial challenges they face due to rising costs of living and high inflation.
In these unprecedented times, the national vacancy rates stand at a shocking 1.1 per cent, the lowest it has been in a very long time. This translates into a stiff competition between aspiring renters for the few properties that are on the market. Serpentine queues for home inspections, especially in the capital cities, and atrociously high rent has become commonplace, with this vital task of finding a roof above your head becoming an anxiety-ridden exercise.
Just the rising mortgage rates can have a significant impact on buying power itself. A 1% increase in rates can add hundreds of dollars to a monthly payment and make it difficult to qualify for a loan in the first place – a factor that is affecting a vast majority of homeowners who availed of home loans at a low rate only a few years ago. As a result, if you are a buyer, you might be forced to purchase a less expensive home or wait until rates drop before entering the market.
If you are a migrant who has just arrived in Australia, either on a Permanent Resident Visa, work visa or student visa, you’d best be prepared for a tough road ahead, at least in the short term. I may appear to be beating the doomsday drums a bit too loud, but I’d rather have that than have you caught unawares when you arrive in Australia.
The article below compares the option of renting versus buying in Australia, which probably holds true everywhere in the world and not just in Australia. Nevertheless, it is aimed to get you thinking about the pros and cons of either option. The links at the end of the post provide you with resources to do further research and to help you make informed decisions in an overheated market.
Homeownership Vs Renting in Australia
Investing in a home, whether it is a rented or homeownership property, is one of the most critical financial decisions you will make in your life. It’s important to do your homework and do thorough research to weigh the pros and cons of homeownership versus renting based on your financial situation. Many young Australians dream of owning a home due to the long-term security and stability it will provide them. However, some residents prefer renting to buying a home due to the freedom of renting an apartment in any location they would like and being less financially stressful than buying a home. Below we look at some of the benefits of homeownership and renting to help you make an informed choice when deciding whether to rent or buy a home in Australia.
Benefits of Homeownership in Australia
- Build equity
One of the main benefits of homeownership in Australia is the building of equity which is typically the total value of your property. Your home’s property or market value increases with time and when making extra or additional payments to your mortgage. When you buy or own a home, you can take advantage of your home equity to buy another investment property, renovate your home, or fund other purposes. When renovating your home correctly, you can potentially increase the value of your property, which will enable you to maximise and increase the resale value of your property or home in future.
- Long-term investment
Owning a home is a long-term investment strategy. Having an asset or property that has the potential to increase significantly over time is a huge benefit for potential buyers and investors. Depending on your property or asset and the local market, your home or property may increase in value over the long term at more increased rates than inflation. Before you buy your home or property, you must conduct a detailed inspection of the property and carefully consider all the aspects and any challenges that may affect its value and growth.
- Personal and financial security
Homeownership will give you a more sense of security than renting. Living in your dream home means you are not at risk of having to move into a different apartment or rental property due to rent becoming unaffordable or due to a rental agreement finishing. Owning a home can be a very valuable asset during your retirement. You can use your home equity to invest in another property, explore various investment options, consolidate other debts, or organise some home renovations.
Data Source Credit: PropTrack Home Price Index | PropTrack – realestate.com.au
Benefits of Renting in Australia
One of the main benefits of renting in Australia is being more affordable than buying. In most cases, monthly rental payments are much lower than mortgage repayments, mainly in the major capital cities. Renting can be a huge advantage, especially for young professionals seeking career opportunities and a fast-paced lifestyle in the city. Renting can be of greater value and advantage if you can afford to pay your rent conveniently, have extra to put into your saving account each week and cater to your bills and expenses. This may not be entirely true in e current market scenario where anyone entering the property market – whether as a renter or a first-time buyer – faces the prospects of either inflated rents or high-interest rates on mortgages.
- Access to amenities
Another benefit of renting is gaining access to amenities that would otherwise stand to be a huge expense. Luxury facilities in most midscale or upscale apartment complexes, including a fitness centre and in-ground pools, are some benefits that renting offers at no extra charge to tenants. A homeowner that wants to install some of these luxury facilities is expected to pay thousands of dollars for installation and maintenance costs.
Homeownership or buying a home benefits owners and potential investors in the long run due to the financial security and amount of equity acquired from the home or property. In the long run, renting has nothing tangible to show in the years of rental payments. However, if you want to avoid the hassles of homeownership, including high mortgage repayment costs, property taxes and upkeep costs renting might be a better option. The choice between homeownership and renting depends on your financial situation, lifestyle choice, or whether you are in retirement or working.
Links for the research
- Handy tips for Rental Properties in Australia – Migrant Ninja
- 5 Tips for renting in Australia without a Rental History – Migrant Ninja
- The ultimate guide to renting – realestate.com.au
- The ultimate guide to buying your first home – realestate.com.au
- The ultimate guide to renting (domain.com.au)
- How to find an affordable rental property: Six strategies for renters looking for a cheaper place to live (domain.com.au)
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