Renting vs. Buying: Things to consider
The dream of homeownership remains strong among Australians, yet for many it feels like a distant milestone to achieve. Over the last several years, the average age of first-time buyers has climbed to about 35, as growing financial pressures have made it tougher to pull together a deposit.
Meanwhile, the landscape of Australia's housing market is constantly evolving. In cities across the country, property prices have climbed sharply due to a lack of available homes (and other economic factors). The rental market is also feeling the squeeze as limited availability and increasing interest rates have driven up rents.
It's no wonder that many tenants and people living at home are questioning whether buying a home is a realistic (or sensible) goal.
Key considerations
When weighing up renting against purchasing a home, it’s crucial to consider the financial implications of each. Both choices come with distinct costs and benefits and understanding them is essential for making a sound decision.
Interest rates and home loan costs
The recent rise in interest rates has significantly lifted borrowing costs. For buyers, especially those without a large deposit, this means steeper loan repayments and reduced affordability, adding another hurdle for those entering the market for the first time.
Property trends
Property prices have surged in many parts of the country, fuelled by limited supply and high demand. In some cities, price growth has outpaced wage increases, making it even harder for renters to make the leap to homeownership.
Although owning a property can help build equity over time, upfront expenses like deposits, legal fees and stamp duty can be substantial barriers to overcome.
Challenges in the rental market
Renters aren’t necessarily in a better position. With record-low vacancy rates across several regions, rental costs have risen sharply. For individuals or families seeking consistency, the unpredictability of the rental market can be just as daunting as the financial demands of buying.
Lifestyle and your goals
Decisions around renting or owning aren’t just about money, they’re also about lifestyle. Renting provides flexibility, which is beneficial for those who might relocate for career, education or personal reasons.
On the other hand, owning a home brings greater stability and allows for personalisation of your living space. For those planning to stay in one place or raise a family, the security of property ownership can be invaluable.
The pros
Renting
- Less expensive upfront costs
- No responsibility for maintenance and repairs
- Improve credit score with rent
- No mortgage debt
- Easier to relocate/break lease
Buying
- Build home equity
- Freedom to renovate
- Government incentives
- Home appreciation
- Ability to rent out property
The cons
Renting
- Unable to build equity
- Potentially higher costs over long term
- Less control over living space
- Landlord can raise rent or evict
- Less privacy
Buying
- Expensive upfront costs
- Potential long wait period (if building)
- Maintenance and repairs your responsibility
- Extra costs - council rates, insurances etc.
- Less flexibility/freedom
Help with your decision making
If you’re still unsure whether renting or buying a home is best for you, don’t worry. There are a number of tools and resources available to assist you with your decision.
Sometimes seeing the numbers in black and white is all the help you need. Luckily there are some helpful tools to choose from:
Speaking to an expert can also provide you with clarity and help you decide on a way forward. You could discuss your options with a financial advisor or even just someone you know and trust who has experience of renting and buying.
If you decide to buy, our home loan specialists are experts in the first home buying journey. They can guide you through early pre-approval conversations right through until settlement day.
There is plenty of support available to first home buyers, including government grants. And our dedicated first home buying checklist could be a helpful read if you decide buying is for you.
Important information
Banking and Credit products issued by Police & Nurses Limited (BCU Bank).
Any advice does not take into account your objectives, financial situation or needs. Read the relevant terms and conditions, before downloading apps or acquiring any product, in considering and deciding whether it is right for you. The Target Market Determinations (TMDs) are available on our website or upon request.