4 min read | 3 Aug 2022
But it’s never been the one-size-fits-all option for everyone. And that’s ok.
Both renting and owning have some vastly different pluses and minuses, and the combination that works for you might be very different to someone else’s. On top of that, the best option for you might change over time. After all, when you consider that the standard mortgage term is 30 years, imagine how different your life and your needs would or could be in 2052 compared to now. So is it better to buy than rent in Australia in 2022? The answer today comes down to balancing what you value most with the price you’re willing to pay for it. We’ve listed some of the pros and cons you might want to weigh up.
You'll own more and more of your property with every repayment that pays off the loan principal.
You and your loved ones (including your pets) will have somewhere familiar to live for as long as you want, however you want, with no landlord to answer to.
You can decorate, renovate and add to your home, so it’s exactly how you want it, which will probably help increase its value too.
Property is a safe investment in Australia, so the value of yours could probably increase.
If you want to live somewhere else, you can rent your place out and have a tenant effectively cover your mortgage repayments for you while its value continues to climb over time.
It can take a long time to save up enough to cover not just the deposit (usually 20% at least) but also other one-off costs such as stamp duty, conveyancing fees and lenders mortgage insurance, plus have the money for ongoing costs like strata fees, water rates and council rates.
You’ll have a large debt for years, probably decades.
The amount you end up paying in interest can add up to hundreds of thousands of dollars.
You need to have other money available to maintain your property and pay for the inevitable repairs.
There's no guarantee your property will rise in value. Sometimes, certain areas get hit with significant price falls that take them a long time to recover from.
You can move from suburb to suburb, city to city and even country to country much more quickly and easily.
Rent is often more affordable than mortgage payments on the same kind of property.
You can afford to live in areas you may otherwise be priced out of as a buyer.
You don’t have to save up for a deposit.
You have the financial flexibility to use any extra money to invest, save or spend as you see fit. In fact, when accounting firm EY (formerly Ernst & Young) did a study into the rent v buy debate, they found that “…in 62% of (cases), people were better off renting and maintaining a leveraged investment in the ASX200 compared to owning a unit in the same area.”¹
While rent is often called “dead money,” you could say the same thing about the thousands you’ll end up paying in interest on a home loan.
You’re free of a large, long-term financial obligation.
You don't pay any rates or body corporate fees.
You don't have to pay for repairs or worry whether the price a tradie wants to charge is appropriate.
You can’t really do much to change the property or personalise it to your tastes. Even screwing hooks into the walls and painting over the owner’s questionable colour choices is difficult because it's simply not your place.
Many landlords still don’t want or allow their tenants to have pets.
You’re there at the discretion of a landlord who might make decisions you don’t like.
Landlords have a habit of regularly increasing the rent.
There’s a lack of security because leases aren't permanent. In fact, most leases in Australia are for no longer than 12 months, after which they’re on a month-to-month arrangement.
If the landlord wanted to sell the property, they could evict you with very little notice.
There’s no investment potential – except for your landlord.
The decision to buy or rent depends on your life goals, your financial position, and what you feel comfortable doing. If you’re still making up your mind, maybe these hypothetical scenarios can help.
You’re a young family and you like your neighbourhood
If you want some stability today plus security for the future, buying might be right for you. If you're already established in a local area (maybe your kids happily attend the local school and could never imagine leaving their friends) and you can afford to buy there, even better. Read our article Steps to buying a house to find out more.
You're a couple without kids who love living in the inner-city
If you’re in a fashionable, well-serviced, well-connected area, and you’re having a blast there, renting’s a good option if it’s too expensive to buy into. You'll have the freedom to freshen things up by moving apartments every so often, and if you’re interested in investing some of your disposable income instead of saving up a home deposit, this approach makes that possible. But if you really have your heart set on buying a place somewhere, you could also consider staying put and buying an investment property in a more affordable area. You’d be able to build steady wealth through a property investment while enjoying the flexibility of renting where you love.
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