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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?
VYBerlinaV8_the_one_ 11:10 am 17 Jun 09

Houses that you don’t live in are, indeed, an excellent investment. But as far as where you, yourself live, purely from a financial perspective, you are far better off renting (until such time that you can pay cash for the house that you live in).

Bear in mind that this is based on the assumption that you invest the difference consistently. As such, you would need to save for a few years while renting, then purchase an investment property (or leverage shares investment) of your own, which in time would generate enough cashflow to compensate you for the difference.

The average mortgage repayments would include a lot of households repaying, say, an $80,000 mortgage acquired 20 years ago, whereas everyone in the private rental market would be paying market rate.

SHHH! You’re letting the cat out of the bag!

mooo_cow 10:50 am 17 Jun 09

Another fine example from REIA’s (not PR but) BS Department.

I just jumped on the Commonwealth Banks home mortgage calculator and punched in $450,000 at 5.74% for 25 years and the total came to $656 a week.

What ever happened to PR Code of Conduct guildines?

deezagood 10:48 am 17 Jun 09

The Brad said :

In the long run, a house is always better because of equity growth.

Ideally, a house should double in value every 7 years. Realistically, it’s more like 10.

A rental property is not an investment for the tenant.

Houses that you don’t live in are, indeed, an excellent investment. But as far as where you, yourself live, purely from a financial perspective, you are far better off renting (until such time that you can pay cash for the house that you live in). Don’t take my word for it – read ‘Rich Dad, Poor Dad’. That said – there is nothing as nice as living in a house that you own.

The Brad 10:44 am 17 Jun 09

In the long run, a house is always better because of equity growth. Ideally, a house should double in value every 7 years. Realistically, it’s more like 10.

A rental property is not an investment for the tenant.

James-T-Kirk 10:33 am 17 Jun 09

By golly gosh, no no no!

Ozhair 10:27 am 17 Jun 09

So, James-T, will you then change your username here to Joh Bjelke? 😉

jackal 10:27 am 17 Jun 09

This is comparing apples and oranges. The average mortgage repayments would include a lot of households repaying, say, an $80,000 mortgage acquired 20 years ago, whereas everyone in the private rental market would be paying market rate. 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.

James-T-Kirk 10:24 am 17 Jun 09

On the subject of Body Corporate fees – Just pay them. My ultimate goal is to own enough units within a given estate so that my vote is pretty much all that is required — Just like in the old days in QLD! – Mwa Ha Ha Ha!

James-T-Kirk 10:22 am 17 Jun 09

As a landlord I am all for people believing that it is cheaper to rent – go for it – Keep on paying off my vast array of rental properties – while the ATO gives me money back for the negative gearing!

All the while, my wealth is actually increasing, based on property.

Just like Monopoly!

Whoot!

VYBerlinaV8_the_one_ 10:14 am 17 Jun 09

In an artifical model it might be cheaper, but not in the real world. Bear in mind, though, that it could well be cheaper for an investor to buy a property than the cost of the rent (in other words, an investor could buy the property, and the total costs minus the tax benefits could be less than the rental yield).

Ruby Wednesday 10:02 am 17 Jun 09

Our minimum repayment per fortnight is only about $50 more than we were paying in rent (and rent was about to go up when we left). Sure, there are extra costs associated with home ownership, but there are also things like security of tenure, no bloody rental inspections, ability to keep a pet and the whole ‘building an asset’ thing going for it.

FC 9:52 am 17 Jun 09

Good point there with the extra expenses. House maintenance which renters wouldn’t have to pay can be quite expensive and up up as well. Add in Body corporate fees if you are in a town house or complex..

deezagood 9:49 am 17 Jun 09

caf said :

Comparing average (mean) repayments with median rents isn’t comparing like with like. They also don’t take into account expenses that renters don’t have, like water bills and land rates.

As well as the enormous expense that come with the ongoing upkeep of an owned house; leaky roof, broken oven, dodgy hot water system etc… all must be fixed/replaced without any tax advantage. Non-investment property houses are an absolute money pit!

caf 9:43 am 17 Jun 09

Comparing average (mean) repayments with median rents isn’t comparing like with like. They also don’t take into account expenses that renters don’t have, like water bills and land rates.

FC 9:42 am 17 Jun 09

Well thinking about my minimum repayments for my mortgage (which is not what I pay anyway), but they are very similar to the amount I would be paying per week if I were to rent a similar property.

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