Debunking Dead Money: Is It Right to Rent?

Surging property prices has led to more people renting in the city. This has popularised the question “is rent dead money?” Many think so! However, in the current market conditions, is it financially viable to look to rent long-term? Our experts have had a look at the stats, and will discuss the topic below in: Debunking Dead Money: Is It Right to Rent?

Buying Property: The Stats

Corelogic data shows that weekly mortgage repayments, on average, are cheaper than weekly rental payments for 36.3% of homes. This is a 2.4% growth from last year. This data does not account for the need to arrange a deposit, Lender’s Mortgage Insurance (LMI), stamp duty, and the other significant fees of purchasing a home.

It also does not account for the disparity in house prices between regional and metropolitan areas, with regional houses being 60.1% cheaper to buy than rent, with metropolitan areas averaging 28.2%. The figures for different capital cities and regions are shown below:

Renting Property: The Stats

According to SQM Research, in certain capital cities, the vacancy rate has significantly reduced, increasing rental competition and giving landlords the opportunity to raise rents. This data is shown below:

What Does This Mean?

Renting in the capital cities of Sydney and Melbourne tends to be a better option, due to the low amount of houses that are cheaper to mortgage, and the higher vacancy rate. More often than not, due to the high house prices, this can be the only option. However this doesn’t mean that home ownership is unattainable. Rentvesting is an option for city-dwellers who are looking to own a home one day, but in a more affordable area. These city-dwellers rent out their property to regional renters, which covers their mortgage repayments. They then rent in the city to continue their work.

However, homeownership isn’t always the key to financial success, with EY Chief Economist Jo Masters stating that more often than not, over a 10-year period, renters are better off. Renters more often have free capital to invest in shares or other investments.

There are a lot of things to consider regarding your home-ownership decisions, such as the long-term nature of it, where you are looking to live and work and more. Our property and finance experts have helped hundreds of clients in this field and would be more than happy to help you with any questions. I’ve you’d like a chat, get in touch with us here.

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