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Should I Rent Or Buy A House? 7 Powerful Reasons

Should I rent or buy a house? Australia’s economy is experiencing movement once again which means the media each day is full of stories about interest rates, home loans and property prices. Some news is promising, such as a decline in the soaring property prices experienced in 2021, while other stories are less encouraging, including the expected mortgage stress many will feel as interest rates rise. 

So, what does this mean for the average Australian and is now the best time to buy or stay where you are? They need to ask themselves, Should I rent or buy a house?

As with any scenario there are arguments for and against buying property right now. The factors working against the potential buyers are as follows. 

 

Interest rate increases 

 

It’s no secret that interest rates are on the rise, and after a couple of years of historically low rates on home loans lenders are passing on the Reserve Bank of Australia’s cash rate hikes and clawing back some of the basis points they slashed in the peak of the pandemic. 

 

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Even a small interest rate increase of tenths of a percentage can mean an increase in monthly repayments in excess of hundreds of dollars, and for those who don’t yet have a mortgage and are seeking approval a rate rise can diminish borrowing power as lenders tighten their criteria. 

 

Housing price increases 

 

Despite the drop in auction clearance rates and slowing rate of property prices, sales are steady and most properties are holding their value, particularly in places like Cairns where stock is limited. This, coupled with difficult lending conditions and higher monthly repayments can create an unattractive scenario for potential buyers. 

 

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Rental costs are relatively stable 

 

If you are renting you already know how much you will be paying each period for the remainder of your term. Unlike lenders with variable interest rates on their home loans, you can budget for the foreseeable future. Although rents are on the up and up and rental properties are harder to come by, there may be more safety and security in staying put at least until the lease term is nearing its end. 

Conversely, the arguments for buying a property are just as convincing and depending on your personal circumstances it may be more beneficial to buy in the current climate. 

 

Competitive rental market 

 

Vacancy rates in Australia, particularly in places like Cairns, are low and the rental market is competitive. In a landlord’s market, the tenant wields less power which makes negotiating fair rental prices harder. If you buy a property to live in you won’t have to wonder if your landlord will renew your lease for another period. 

 

rental cost increase

 

The rental may increase 

 

If your landlord does renew your lease they may seek an increase. Although landlords are entitled to increase the payments they must do so by a reasonable amount. However, with rental prices being relaxed in 2020 and even into 2021, some landlords are now hiking their prices up by 20 to 30% to make up for the lost income experienced during the height of COVID. If you are not locked into a contract you may be at risk of your landlord upping the rent.  

 

Affordable repayments 

 

Although creeping interest rates and the rising cost of living are causing mortgage stress in some areas, other potential home buyers may find they are already more than covering the cost of a monthly mortgage repayment with their rental payments. For people in this situation, the idea of putting thousands of dollars each month into a home of their own rather than paying off their landlord’s asset may be quite compelling. 

 

Should I rent or buy a house? Discover additional costs and inconvenience

There is a lot to be said for staying in your current home to save money. In addition to the purchase price and stamp duty, buying a home comes with many hidden costs that add up quickly, including building and pest inspections, conveyancing and mortgage fees and that’s even before you have paid removalists and touched up any areas in the new place that need renovating.  

 

Additional costs and inconvenience

 

Every individual, couple and family is in a unique position and while the for and against arguments for buying a home or staying in a rental property are food for thought, you should seek the assistance of a mortgage broker to understand your borrowing capacity and whether buying a home would be financially advantageous in your current situation. 

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By Lauren Eakins

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