Renting versus Buying - The Housing Dilemma
David Nitschke principal of First National Pope Nitschke says current market conditions, coupled with increasing housing affordability, is causing a rental dilemma. Many renters are questioning if now is the time to stretch their budgets and commit to buying their own home.
“With lowering interest rates and falling house prices, home buying is proving almost too attractive for many renters, but serious consideration needs to be given to the person's individual and financial situation to ensure they make the right decision,” Mr Nitschke said.
“It may appear, on the surface, that purchasing a home may make more economic sense for those doing it tough, where the monthly mortgage is not too far off what they are currently paying for rent, but a closer look may reveal that incidental costs and a small change in circumstances could lead to an untenable situation.”
According to Mr Nitschke, the advantages of each housing option should be weighed against the drawbacks to find the one that best suits their specific needs and situation.
“Renting offers great flexibility with the option to relocate from home to home and area to area, as the need arises, which is not the case with buying a property,” David Nitschke said.
“If finances get tight, or the home situation changes for any reason, it is far harder to just pick up and go if you own your own home.
“Renting is also often a cheaper alternative to buying, especially in the inner city areas particularly favoured by Gen Y-ers who want that urban lifestyle close to where they work.”
While vacancy rates continue to be under pressure, the fact remains that renting may still be more affordable, with monthly rental payments usually less than a mortgage repayment for a comparable property and without the other incidental costs which can be incurred as a homeowner.
“One of the greatest financial and stress-free advantages of renting is that property maintenance costs, repairs, rates and insurance bills are the responsibility of the landlord, not the renter,” Mr Nitschke said.
Despite these many advantages of renting a property, there are some disadvantages which will make buying preferable, particularly in light of escalating monthly rentals. The most obvious one being when renting, it is not possible to put your personal stamp on a property to suit your individual style and design preferences.
“There is also the inconvenience, and in some cases pressure, of knowing your landlord has the right to inspect their property whenever they wish, with sufficient notice, potentially disturbing the renter's privacy,” Mr Nitschke said.
“But the biggest disadvantage of renting is that the property can never be paid off by the tenant, making the money lost for good, without any chance of recovering when the property is sold.”
Ultimately, this is the biggest difference and that is where advice should be sought to determine the short and long-term impact on personal net wealth and cash flow over a lifetime between renting and buying.
“Usually, the decision will be to purchase a home, but it will come down to making sure people buy well and buy right, at the best time for their own individual circumstances,” Mr Nitschke said.
“This is where we at First National Pope Nitschke can really help. We offer advice and assistance with the necessary knowledge, experience and skills to understand the market, its trends and its weaknesses and opportunities,” David Nitschke said.
“Despite some government assistance packages for both renters and buyers being abolished or having become obsolete, such as the First Home Owners' Grant Boost and the National Affordability Rental Assistance Scheme, it is important to remember there are still incentives for potential home buyers and renters to take advantage of, including state government financial assistance packages.
“So home buyers and renters need to learn to make the most of the services we have available, to ensure they make the most of their finances over the long term. There are many creative ways in which to save for that first purchase whilst renting and we can help explain all the options available.”