Is renting or buying a better option for you in the housing affordability crisis?
Struggling to choose between renting or buying in Australia’s housing crisis? This guide breaks down the pros and cons to help you make a confident, informed decision.
With the current housing crisis affecting housing affordability for both buyers and renters alike, it can be tricky to know whether you’re better off buying or renting in the current market.
So, if you’re currently weighing up the pros and cons between renting vs buying, here are a few important points worth considering.
Renting vs buying: which is better?
When it comes to figuring out whether you’re better off buying or renting, there’s no easy answer. Both options come with their own set of pros and cons, so it’s up to you to weigh up your options.
But while you’re at it, there are also a few other points worth considering that can help to guide your decision, like:
- Are you in a financial position to buy a home?
- What kind of features and facilities would your ideal property have?
- What are your long-term financial goals?
- Is the location convenient?
- What is the condition of the property? Are you allowed to make minor cosmetic changes?
- Are pets allowed?
- Is there room to negotiate with the landlord or property manager?
Besides these considerations, it’s also important to weigh up the pros and cons that come with both these options.
Buying a home
While homeownership is viewed as a huge achievement for some, there’s no denying that there are significant barriers to entering the housing market, especially with the current affordability crisis.
So if you’re trying to decide what your next move is, here are some of the pros that come with buying a home.
Potential for capital growth
As a homeowner, you have the opportunity to build equity over time as you pay down your mortgage and as the property appreciates. This can serve as a form of forced savings and potentially lead to wealth accumulation.
Stability and freedom
For many homeowners, owning your own home provides a sense of stability, especially if you’re planning on staying in the same area for an extended period.
Beyond that, you also have the freedom to make modifications and improvements to your property. You can enhance and personalise your living space through renovations, landscaping or interior design to suit your preferences.
You’re not subject to the rules and regulations imposed by landlords, so it’s completely up to you how you use and maintain your property.
Homeownership
Homeownership is a significant financial and personal goal for many people. Owning a home is a huge milestone and can provide a sense of accomplishment. And if you have a family, the wealth you generate from owning a property can be passed down from generation to generation to help set them up for success in the future.
But while homeownership offers a number of advantages, it also comes with significant responsibilities, like maintenance costs and you’re also vulnerable to potential market fluctuations.
These some of the cons that come with buying a home.
Upfront costs
One of the most obvious drawbacks of homeownership, especially with the current housing crisis, is the significant deposit that comes with buying a property.
For most people, buying a home requires years of dedicated saving, which is only made more difficult in the current economic climate. It also comes with a number of additional upfront costs, like stamp duty and conveyancing fees, that need to be factored in and there are also ongoing maintenance costs to consider too.
Market volatility
While the housing market is less volatile than other types of investments, it does go through periods of decline from time to time. As property values fluctuate, it could potentially lead to a loss on your investment. If you’re on a variable loan, you’re also at the mercy of the interest rates. So if the rates go up, so do your mortgage repayments.
Limited flexibility
When your money is tied up in the property it can limit other investment opportunities. Selling a home can be challenging in a slow market, potentially resulting in a longer wait or lower selling price.
Renting a home
Sure, renting is not for everyone, but it can often be a far more flexible and affordable option compared to buying, even with increasing rental prices.
Here are some of the pros that come with renting a home.
More flexibility
When your cash isn’t tied up in a property that you live in, you have more financial flexibility. Renting typically involves lower upfront costs compared to buying, with no need for a substantial down payment or other purchasing-related expenses.
But that’s not all, there’s also more flexibility to move around, which can be a huge advantage if you need to relocate frequently for work or personal reasons without the challenges of selling a property.
Greater affordability
Present housing crisis aside, renting is often considered more affordable than buying. You don’t need to stump up tens of thousands for a deposit and you also don’t have to worry about footing the bill for any maintenance costs either.
Less responsibility
While you’re responsible for looking after someone else’s home while you live in it, that’s usually where your responsibilities end. As a renter, you don’t have to worry about maintaining the home or organising the repairs. You can simply pass on maintenance requests to the landlord or property manager and they’ll take care of the rest.
Renting can be a great option if you prioritise flexibility, lower financial commitments and less responsibilitywhen it comes to property maintenance. With that said, it also comes with its own set of drawbacks that are worth considering.
These are the cons that come with renting a home.
Lack of security
When you rent, you’re at the mercy of the landlord. From rental increases to property sales and simply the decision not to extend a lease, there can be a lot of uncertainty when it comes to living in a rental.
No investment potential
Rent is never-ending. And rather than chipping away at a mortgage, it’s going in someone else’s pocket.
Limited control
As a renter, you usually have limited freedom to make structural changes or significant modifications to the property. Even nailing a hook in the wall to hang a picture needs to be approved by the landlord first.
Plus, if you are able to make changes to the property, chances are you’re going to have to cover the cost yourself and the landlord could end up benefiting.
At the end of the day, the choice to rent or buy is yours to decide. Before deciding to rent, you should carefully consider your long-term plans, financial goals and lifestyle preferences.
While renting offers flexibility, there’s a good chance it won’t provide the same financial benefits and stability as homeownership. So make sure you weigh the pros and cons based on individual circumstances.
If you do decide to buy a home, check out our guide for a helping hand on where to start your journey.
Unloan is a division of Commonwealth Bank of Australia.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Tax law is complex and subject to change. For the latest information, check the ATO website or with your accountant or financial advisor.
Unloan is a division of Commonwealth Bank of Australia is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Full terms and conditions are found on our Unloan Terms and Conditions. Modified Terms and Conditions will be set out in our Notice of Variation Agreement, if you are approved. This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.
