Renting Versus Buying

Both renting and buying have their advantages and disadvantages. Approximately 30 per cent of Australian households currently rent due to the affordability, the flexibility to relocate and the ability to reside in otherwise unattainable areas.

Renting has typically been viewed as a transitory solution to homeownership because it offers an inexpensive entry into the housing market. Unlike property owners, renters avoid taxes, property maintenance costs, and the transactional costs associated with buying and selling, giving them a greater disposable income.

However, renting has its drawbacks – namely a lack of stability and no investment growth. Renters do not benefit from the capital appreciation of the property over time, they have little say in the tenure of the rental lease and they are subject to rent rises.

While buying a property is considerably more expensive in the short-to-medium term, figures show it is more cost effective in the long run due to the growth in property values and the inevitable reduction of debt. Property is one of Australia’s leading investment vehicles for both owner-occupiers and investors. According to the REIV, Melbourne’s five year average annual median price growth is 9.95 per cent.

Due to government tax breaks, some savvy buyers have found advantages in buying an investment property while continuing to rent. By doing this they have a tax effective property that provides capital growth while enjoying the benefits of renting in their preferred location. There are many pros and cons to renting and buying, the decision ultimately depends on your situation. If in doubt about what works best for you, consult a professional.