Turn to any page of a newspaper real estate pullout and you’ll probably feel a hefty kick to the kidney. In case you haven’t noticed, Australian housing prices are high.
But what a lot of Australians don’t also realise is that right now in Australia, because of this insane seller’s market, renters are actually winners. Here are 10 reasons to feel better about renting in Australia.
Record prices in capital cities
Property prices in Australia’s major capital cities, Sydney and Melbourne, have increased by around 10 per cent in 12 months and have officially hit an all-time high. Talk of a potential real estate bubble has grown to shouting, while the Reserve Bank have pointed to weak wages growth and dwindling household savings across the country.
Basically, unless you’re rolling in cash, the climate isn’t right for buying, particularly in Australia’s major capital cities. Take the pressure off yourself.
More money in your pocket right now
By delaying property purchases, you’re leaving more money in your pocket for now.
By choosing to rent now, this puts you in a position to spend your money on other financial goals that have greater returns right now, that you wouldn’t have been able to afford if you were making hefty mortgage repayments each month.
Lower upfront costs
When you sign a rental lease, you fork out money for the bond, a month’s rent in advance and maybe some moving costs. When you sign on the dotted line of a purchase agreement, you cough up for building inspections, loan application fees, lenders mortgage insurance, conveyance fees, stamp duty, home and contents insurance and moving costs, just to name a few.
The upfront costs can put enormous strain on anyone, especially if you have children or existing debts you’re working to pay off.
One of the major advantages to renting is property maintenance.
If your oven explodes or the toilet stops flushing, your landlord has an obligation to a) have it fixed, and b) cover the costs (unless you intentionally set fire to your oven or tried to flush a fedora down the loo).
These reduced ongoing costs make life simpler and your wallet heavier.
More time to save
Because renting in places like major capital cities can often be cheaper than buying (if you put rent and mortgage repayments side-by-side), paying less for bed and board gives you more time to save for a house you like in an area you love, instead of settling for second best.
A lot of people choose to enter the property market as soon as they can, however these folks often compromise on both quality and location. By delaying purchasing until you have a larger deposit, you’re more likely to bag your dream home. The only catch is that you have to be truly dedicated to saving.
Like we mentioned above, it’s often cheaper to rent than buy in certain places in Australia.
A lot of young people also choose to live with housemates, which can more than halve the cost of rent, depending on how many people you share a house with.
Choosing to rent therefore makes it far more affordable to live in places you otherwise couldn’t afford to buy in and enjoy the perks of living in places like inner-city suburbs which would otherwise cost you an arm and a leg to purchase in.
Greater flexibility about where you live
Not only does renting make it affordable to live in areas you couldn’t buy in, but it also gives you the freedom to move around without incurring huge upfront fees that you would with buying and selling.
Rental terms can range from as little as one month to 48 months, after which you’re free to often extend the lease or move onto a bigger or better home.
Renting therefore gives you the freedom to adapt to your house to your lifestyle as it changes.
Greater flexibility about house size
Renting and sharehousing also makes living in a generous sized property affordable. While your friends may want to rent a house with you, you’d be hard-pressed to find a group of people that’d want to co-purchase a home.
This means that owning that dream three-bedroom townhouse in the inner burbs is going to cost you a bundle each week, whereas sharing the rent with two other people makes it possible.
In addition, people’s lifestyles often change as they get older and their families grow, which means their housing demands change. Renting allows you to move onto bigger and better houses as your income and family grows, with ease and minimal upfront costs, and vice versa.
Return on your savings
Renting allows you to free up your savings to earn money elsewhere, which may in fact earn a higher return on your money than property investment.
Though returns on term deposits and savings accounts have been on the decline, this has made other forms of investments like exchange traded funds and shares more appealing.
Buying a home often means all of your savings is going towards the one asset, which more often than not means you’re putting all your eggs in the one basket.
Renting, on the other hand, allows you to not only accrue interest on that savings, but also spread it across a host of other investments. This diversification of your investments also spreads the risk.
Also published on Medium.