Buying or renting – while it has always been a big decision between the two, there is usually one side that comes out stronger. In 2021 however, it is an even bigger decision – do you pay sky high rents or do you pay sky high property prices.
Interest rates are low – at the moment. While the Reserve Bank has noted that interest rates will likely stay low for at least the next three years, homeowners always need to be prepared for interest rates to rise. The issue is – with property prices so high, will those buying now be able to afford their mortgage repayments when interest rates rise?
The flip side is how long do you remain renting, dealing with increased rent and attempting to save a deposit while house prices rise around you?
The Decision to Rent
For many people, the decision to rent really comes down to either not being ready to buy, or not being able to afford to buy, whether that be in the area they want to live or in general. While rent is often seen as dead money, many of those who rent for lifestyle and work reasons often have opportunities to become rentvestors – that is, rent where they want to live and purchase an investment in a great area that sees good levels of returns.
Let’s look at some of the pros and cons to renting.
Pro: With renting comes more flexibility. You can move from one place to another more easily as your lifestyle or work requirements change.
Pro: You don’t need to pay to upkeep and maintain the property, nor do you have to pay council rates and body corporate fees.
Pro: Weekly rent can be cheaper than a mortgage in many areas, particularly when those interest rates start rising.
Con: Stability can be limited as you don’t really have a say on how long you can stay in the property. The landlord can ask you to leave when your lease ends, or they can sell at any time.
Con: Renting doesn’t allow you to build equity. Rentvesting is a good alternative that allows you to build equity, yet live where you want.
The Decision to Buy
We have all seen the auctions happening where older homes in prime locations are going for well over the reserve price; we have seen the sales figures of relatively moderate homes going for well over what they would have even a year ago. If you have made the decision to just leap into the market, your best bet right now really is to buy brand new. That may mean you buy further out of the CBD or perhaps a little further away from work, but it also means you generally aren’t competing with those who have money to splash around on properties going for well over what they are worth.
As with renting, there are some pros and cons to buying.
Pro: As long as your mortgage is paid, you can’t be evicted from your home. You don’t need to worry about rent increases, and broadly, you can do what you want with your property.
Pro: Properties tend to increase in value over time. Not all properties will increase as quickly as others, but if you sell in the right market, you should see a gain.
Pro: Every payment you make builds equity, giving you freedom in the future.
Cons: Buying can be a heavy hit on your finances. You need to consider whether your financial situation now, and in the future, can support home ownership.
Cons: Purchasing in a bad area or purchasing in an overinflated market could see you with a decrease in property value, and unable to sell your home for what you still have left on your mortgage.
Depending on where you live and your financial situation, it may be cheaper to buy, or it may be cheaper to rent. If you have made the decision to purchase a home, or you are considering rentvesting, a new home is a good decision.
Elysian Apartments and Montane Kellyville provide good opportunities for new homebuyers, investors or those looking to re-enter the Sydney market, while The Hampton Shores in Port Macquarie is perfect for those looking to move to a regional coastal area. Find out more about Laurus Projects latest developments, and start dreaming of your new home.