Am i better off Renting or Buying?
Online source: Produced by AMP Life Limited and published on 7 October 2015.
The debate continues
If you’re following the rent vs buy debate, the rental property argument has nudged slightly ahead of the ‘buying property’ alternative in some parts of Australia, according to AMP Capital’s Head of Investment Strategy and Chief Economist, Shane Oliver:
“The picture hasn't really changed that much – except in cities like Sydney and Melbourne, where property price growth has been very strong (making buying more expensive) and growth in rents has been relatively soft – so the case in favour of renting (and investing) over buying has actually strengthened.”
To invest or not to invest
So, you might be wondering whether or not it’s still a good idea to invest in property. You might also be thinking that you would love to buy a house, but you can’t afford to just now. So one option might be to rent in the suburb you want to live in, and buy a property (in a more affordable suburb) as an investment.
But like all property investment decisions, you'll need to consider your personal situation, your goals and the risks you want to take. You also need to be comfortable about whether you’re making a lifestyle or financial decision and what's important to you.
What are the options?
Here are some things to think about if you’re considering renting or buying:
Renting benefits
· You’ll have more financial freedom because you don’t pay for landlord expenses, such as building maintenance, repairs, rates and property insurance.
· You’re more likely to be able to afford to live in the suburb you want (because you’re not paying for the expenses of owning a home).Renting downsides
· You generally don’t have the same freedom to change or renovate the property like you would if it was your own.
· You’re never sure how long you can stay in a rental property. This is fine while you are young and flexible, but as you grow older you might want more certainty and stability.
Buying benefits
· You’ll own your home within 25 to 30 years and start to build long-term wealth.
· Because you own your property, you can renovate it, nail pictures into the wall or even remove the walls if you want to!
Buying downsides
· The costs of buying a house add up – the deposit (up to 20% of the purchase price), the interest over 25-30 years, stamp duty, government fees, loan fees, lenders mortgage insurance (LMI), legal fees, pest and building inspections, bank valuation fees, rates and title registration.
· Selling a property can be expensive and complex – whether you use a real estate agent to sell your house or do it yourself, you’ll need to be aware of what’s involved. You may need to pay agents’ commissions, advertising fees and moving costs. You’ll also need to decide whether to engage a lawyer.
