The Million Dollar Question – Purchase or Rent?

Recent fluctuations in the Brisbane property market have brought fresh perspective to the age-old debate of renting versus purchasing. On the back of historically low interest rates, relaxed lending criteria and government incentives, new light has been shed on the discussion, encouraging many tenants to crunch their numbers. While everyone has an opinion on the subject, the only way to determine which is more suitable for you is by assessing your individual financial circumstances, lifestyle requirements and having a sound understanding of the current market conditions.

Buying property looks vastly different now than it did 50 or even 20 years ago, largely due to the widening gap between income and property price increases. From the mid 90’s to 2008, Brisbane housing prices appreciated by almost 300%, making property ownership an unattainable exercise for many. Since then, Brisbane property prices have seen minimal growth, family living expenses have increased and household income levels have remained relatively stable. The recent COVID-19-inspired shift in the market has challenged these preconceptions and given renewed hope that property ownership may once again be within reach for those looking to transition from renter to homeowner.

The benefits to renting include flexibility, diminished responsibility, the freedom to relocate and no property ownership costs such as council rates, maintenance and body corporate fees. On the flip side, paying rent is often considered ‘dead money’, with no contribution to increasing your savings, investment or overall financial position. When renting, you remain at the mercy of your landlord if they decide to put the property up for sale, move back in themselves or increase the rent, providing uncertainty around the security and longevity of your accommodation.

Purchasing your home is a long-term commitment that requires ongoing costs, maintenance and a higher level of potential risk. Buying property has long been considered the ‘Australian dream’, of which the long-term benefits generally outweigh those of renting. Buying real estate affords a sense of security, builds wealth and eventually equity that will allow you to make further investments. In the current environment of 2-3% mortgage interest rates, roughly half of Brisbane properties cost less to make repayments and ownership costs on than to rent. Conversely, in Melbourne and Sydney there are less than 10% of properties that fall into this category due to higher purchasing prices and lower rental yields.

Referred to as a ‘golden opportunity’ for those looking to purchase, we are currently experiencing an unprecedented shift in the Brisbane property market. There is no way of telling how long these circumstances will last, with conditions already starting to put upwards pressure on housing prices to meet demand. Deciding whether renting or buying will prove more lucrative is dependent on various influences such as the age, type and location of the property. Consider the ongoing costs of each option and seek professional advice from a mortgage broker to assist you in making an informed decision.