Buying vs. Renting

by | Feb 1, 2010 | Accounting News | 3 comments

The age old debate of buying vs. renting has become even more difficult with recent research proving that buying property is becoming cheaper than renting in many parts in Australia. It was found that in 94 suburbs the monthly cost of renting a house is greater than the average monthly mortgage payment. This has forced many people to stop and reconsider whether they’ll rent or buy a property hence we put together an article full of the pros and cons to help you make a more informed decision.

There are some obvious advantages when it comes to purchasing your own home. Clearly a very strong point is that it is an asset to call your own, to pass on through the family or downsize tax free in order to fund retirement. While renting you are not responsible for house maintenance which can be a great advantage; however you will need the landlord’s permission to do things as simple as hanging a picture on the wall or having a pet. When owning your own home it’s completely under your control.

Buying a home and repaying a mortgage can be considered a long term investment. However. as a renter you can set yourself up financially too, by saving the difference that you would have spent on the house deposit and mortgage payments.

Another benefit of owning your own property is that the family home is not subject to capital gains tax. Unlike shares and other assets there is no need to pay additional tax when you sell your home.

BUYING

RENTING

PROS

  • There is security in owning your own home
  • It provides you with peace of mind as you live out the Australian dream of owning land.
  • Opportunity to rent out your house.
  • You may be eligible to receive the First Home Owners Grant.
  • Paying off a mortgage can be regarded as a good self imposed saving plan
  • Buying is not considered “money down the drain” like renting, but money paid towards a loan is equity in your home.
  • You have the freedom to make changes, eg knock down a wall, paint or install a new kitchen.
  • Increasing property values
  • The emotional and psychological benefits of creating your own home.

PROS

  • Cheap weekly rent
  • You are not responsible for maintenance and repairs.
  • Opportunity to invest in a variety of assets, rather than being tied up in a single asset.
  • There is a large amount of flexibility offered, with ease you can change where you want to live, go traveling etc.

CONS

  • Rising property prices makes it difficult to enter the market.
  • There is a BIG upfront deposit.
  • You could feel “trapped” with a mortgage.

CONS

  • You have to abide by the landlord’s restrictions on the property.
  • Lack of security, rent could rise out of your affordability range.
  • Your landlord could be unpredictable and decide they want to sell or move in to the house, thus you have nowhere to live.

Ultimately your decision to buy or sell will depend on your financial and personal goals. By weighing up your stage in life and your lifestyle needs you should be able to make an informed decision about what option is best for you.

To find out more about whether buying or renting is most suitable for you please contact The Quinn Group on 1300 QUINNS (784 667) or click here to submit an online enquiry.

3 Comments

  1. diane logan
    diane logan on February 5, 2010 at 9:54 am

    i’m assessing whether to keep my home which i own outright, valued at about $450,000 or sell, invest in a term deposit and use interest to cover rent. In the pros for owning I see you state rising house prices which has been true in the past however do you think that Australia is heading towards an American sub-prime situation, and in so doing house prices won’t continue to rise but will in fact fall soon? I’m a single female, hoping to retire in 5-10 years and in the past the concept of owning my home has been important to me. Do you consider that renting long-term is the answer but in so doing, is it possible that I may be priced out of the market if I want to buy again in the future?

    Looking forward to your reply

    Diane

    • Michael Quinn
      Michael Quinn on April 13, 2010 at 1:49 pm

      Hi Diane,

      Thanks for your post.

      You have raised some very good questions, however an answer to this can be quite complicated.

      i will have somebody from my office contact you to discuss this in greater detail.

  2. Samantha
    Samantha on February 25, 2010 at 1:56 pm

    The information given in “Buying vs. Renting ” was very insightful. I very much enjoyed reading it and took alot from it.

    thanks !