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Cheaper to buy than to rent in Canberra?

By johnboy 17 June 2009 70

The ABC has picked up a Real Estate Institute of Australia (REIA) media release claiming that in Hobart, Darwin and Canberra it’s cheaper to buy a house than to rent it.

This is mostly because house prices are dropping while rents are not.

Before taking it to seriously though, remember that it’s the REIA’s job to encourage people to buy houses.

What’s Your opinion?


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70 Responses to
Cheaper to buy than to rent in Canberra?
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ireneJ 4:50 pm 22 Aug 11

I have heard the latest news on rentals, that it has become less expensive to buy a home than to lease one in thirty-nine of the fifty largest U.S. cities – Cheaper to buy than to rent in many U.S. cities . That is the conclusion of Trulia’s current Rent vs. Buy index released Wed. The study predicts a deepening slum in an already troubled real estate market. For prospective homeowners, whoever, it could possibly be welcome news. As for me, it would be measuring how long one would have to own a home in each of the cities to make it worth owning over renting.

Clown Killer 4:33 pm 18 Jun 09

That’s fair enough, but in that case can anyone come up with a way that allows retail investrs to access the property market. If you remove the ability to cross over revenue and income streams then it really will be only for the very well off.

caf 4:04 pm 18 Jun 09

I don’t think the anti-negative-gearing case has a problem with offsetting expenses against revenue in general. Rather it’s the more lenient (and questionable) idea of offsetting revenue from one activity against expenses occurred in another – for example, offsetting your rental expenses against your salary income (whereas offsetting rental expenses against rental income is fine).

Clown Killer 3:34 pm 18 Jun 09

wouldn’t house prices fall due to less demand in the market

Possibly, but many folk will be reluctant to cut their losses unless their forced by other factors – this is peoples nest-egg, rainy day, something to live on in retirement money so they tend to get quite precious about it.

I’d say that a more likely scenario would be that the government that brought about the changes wouldn’t survive the next election and the status quo would return. It’s worth remembering that the mechanisms used by investors are basic business and taxation principles – the ability to off-set expenses against revenue is fundamental to business taxation so it wouldn’t just be one class of investor (property and real estate) that would have a vested interest in seeing the status quo return it would be just about everyone who is in business.

Chop71 3:26 pm 18 Jun 09

As 1/3rd of the population own their own house outright and another 1/3 are paying off morgatges, no government in their right mind would allow property prices to drop in Australia. There are just too many votes to lose. As such governments continue to add measures like the stamp duty concessions and the 1st home owners grant to keep new people entering the market.

I feel that Canberra’s low unemployment rate compared with other Australian areas should see property here remain strong (if not bullish).

chewy14 3:01 pm 18 Jun 09

Clown Killer said :

I would like to see all those tax dollars saved by negative gearing being collected and used for public housing.

The math dosn’t add up. The massive pool of investment properties provide affordable housing for a huge proportion of the community. Remove the legitimate abiliy to off-set expenses against income stream and people will invest elsewhere.

Yeah, but if this happened wouldn’t house prices fall due to less demand in the market, thus making house prices more affordable?

Clown Killer 2:49 pm 18 Jun 09

I would like to see all those tax dollars saved by negative gearing being collected and used for public housing.

The math dosn’t add up. The massive pool of investment properties provide affordable housing for a huge proportion of the community. Remove the legitimate abiliy to off-set expenses against income stream and people will invest elsewhere.

SheepGroper 1:57 pm 18 Jun 09

monomania said :

I would like to see all those tax dollars saved by negative gearing being collected and used for public housing.

How much money is that exactly? It’s not as if a large proportion of the population has negatively geared property.

Grrrr 1:37 pm 18 Jun 09

Buying is of similar cost to renting, but not because house prices are dropping while rents aren’t. House prices have only dropped a few % for the most part (or have evne risen.) It’s because mortgage interest rates have almost halved!

jackal said :

Repayments on a $400k loan – the cheapest cost of a house in Canberra these days, are well above $400 a week, the median rent in the ACT.

You haven’t done the sums.

Renting: A $400k house earns maybe $425/week in rent, which is $22.1k in a year.

Buying: Mortgages are now 5% which means a $400k loan is $20k of interest in a year (or $385 a week!) To keep things simple, I’ve assumed the loan is interest only and for 100% of the property purchase cost. Add $2k a year for rates, water etc to your loan costs and you’ll see that in comparison, renting is no cheaper than purchasing in the ACT at the moment.

At best (nasty old house = low rent, but in a great neighbourhood = high land values) renting is a bit cheaper .. and at worst, a little bit more expensive.

Go and have a look at the UK’s or the US’s recent property price performance to help get some perspective.

Go have a look at how inner city property prices in cities in these countries with strong employment have changed.

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