The current climate of housing prices in Australia is causing controversy and concern throughout the nation.
Photo: Kate Hunter
With prices in Sydney and Melbourne getting further out of reach for first time buyers, it’s not surprising those buyers are feeling the pressure.
Stephen Fitzsimon from Melbourne Realestate says the idea that everyone should eventually own their home is misguided.
Young Australians have historically been encouraged to ‘get a roof over their heads’ as soon as possible into their working lives but Fitzsimon says the Australian market supports investment property ownership rather than home ownership.
“Plenty of first property buyers will rent a home to live in, often for years after purchasing their first investment as the tax breaks on investment properties and the affordable rental market makes paying off a mortgage while renting the most financially solid option,” he says. Fitzsimon says another factor to consider is the importance of location.
“It’s more affordable to rent in popular suburbs than it is to own.”
Some experts may argue that if a person is serious about owning a property they should make the sacrifice and move to a less desirable area. However home ownership isn’t necessarily a goal for everyone. It’s perfectly acceptable to prioritise quality of life and if non-home owners are happy renting in areas they love to live. Often weekly rent is a lot less than mortgage repayments on a similar property, so renters can come out in front from a cash flow perspective.
Fitzsimon recommends renting if location is something that an individual can’t compromise on. Consideration should be given to common property buying risk as well. Uneducated buyers can sometimes make mistakes when they first enter the market. Fitzsimon says one of the biggest mistakes is buying and selling too quickly and losing the stamp duty on the sale of a property. He says this happens when people rush into buying a house, realise they can’t afford it, pay the $25,000 odd stamp duty on the home and essentially lose money by not waiting for the investment to appreciate.
Fitzsimon also says that first home buyers will often rush in and buy homes that are south facing or require more renovations than they first thought. These can turn out to be very expensive mistakes.
Today’s changing job market and the casualisation of the workforce can also hamper buyers’ efforts to save for a deposit and feel confident to enter the property market. Fitzsimon says saving a deposit is the easy part of buying a property – guaranteeing a steady income for the next 20 years to pay it off is the hard part. If a steady income and financial security is uncertain, renting is certainly a better choice he says.
Often home ownership is not always the best case scenario, even for people who earn a decent income. Renting provides financial and geographic freedom, less responsibility, opportunities to live in areas that would be unaffordable to own and can even assist with the purchase of a first property. Ownership of a property is certainly something everyone should consider but if the circumstances don’t line up or lifestyle choices don’t permit it, the experts say it’s perfectly okay to rent.
Date: 1st July 2016
Author: Carly Jacobs