Rent or Buy? Could now be the best time to invest in your future?
Interest Rates are low, rental property supply remains tight and rental prices for homes and units are on the increase. So what is better for you, to rent or to buy?
With a recent (September 2015) Herron Todd White Report indicating that low rental vacancy rates continue to place mild upward pressure on rents supply in Cairns, perhaps it is a good time to sit down and consider what is best for you over the long term.
As indicated by Herron Todd White, over the twelve months to September 2015, the Cairns weighted average median rent has increased by $5 per week, from $380 to $385 per week for houses, and from $265 to $270 per week for units. (N.B. The median rent is the middle-priced rental from the list of properties rented during the quarter. Movements in median rents do not necessarily equate to movements in individual property rents.) (Info source: Herron Todd White Report, October 2015 – to download full property report click HERE).
If you are in the situation to be able to look at the long term, when you compare renting against buying, with interest rates at historical lows, now might be the perfect time to consider purchasing your own home. Currently, if you were to borrow $300,000 on a home loan your repayments would be approximately $361 per week and $240 per week on a $200,000 loan (*based on a rate of 4.75% over 30 years) – compared with the median rental price of $385 per week for a house or $270 per week for a unit.
It can be a very difficult decision to choose between renting and buying, but at the end of the day if you are having to spend $385 per week on rent, wouldn’t it be worth considering investing that money in your future and not someone else’s investment portfolio?
Of course, comparing like with like is a difficult task when factors such as interest rate charges, rent increases, maintenance costs and appreciation are hard to predict. Assumptions have to be made about how often rents increase, and likewise, any calculations of property purchase has to take into account costs like the deposit, loan establishment fees, property maintenance and strata fees (Body Corp) and council costs (Rates & Water), which are of course are in addition to any purchase price.
REASONS FOR BUYING
Thankfully money is not the only contributing factor in the decision about whether to buy or rent. The most obvious advantage to buying a home is the sense of security and stability it brings. It gives your family an asset to call their own that can be passed down through generations or downsized to fund retirement.
Another great advantage is that the family home is generally exempt from capital gains tax unless you rented it out for a time or it’s on more than two hectares of land.
Property ownership also allows you the freedom to do what you want with the property. Whether it be hanging a picture, replacing a hot water system or owning a pet – it’s your own little piece of Australia under your control!
REASONS FOR RENTING
But perhaps you feel that you’re not in a financial position to buy or you enjoy the freedom of being able to move around, in which case renting may be your best choice. Renting gives you the opportunity to live in an area where you may not be able to afford to buy and you are free of the costs of maintenance, rates and insurance.
Renting also allows you to move homes more frequently, but on the other hand there is the uncertainty of not knowing whether you will be able to remain in a home you have grown fond of.
Ultimately the decision to buy or rent will be determined by your individual circumstances and finances. It’s important you are able to meet the monthly mortgage repayments and the additional expenses that come with being a home owner (rates, insurance etc), and this is where we can help – our services are FREE and as we work with all the major lenders are able to source the very best finance deal out there and tailor a home loan suited to your lifestyle and financial position. If you are considering buying a home, don’t hesitate to give one of our professional mortgage brokers at Astute North Queensland an ‘obligation free’ call to discuss your lending options P: 1300 880 767