With affordability becoming more strained in densely populated cities like Sydney and Melbourne, many aspiring homebuyers have resigned themselves to a lifetime of renting.
However, with rents starting to soar and vacancy rates hitting record lows, some real estate experts think we’re heading towards a genuine rental crisis in key pockets.
According to Leonard Teplin, director at Marshall White Projects, a Melbourne-based residential development project marketer, the current rental climate and historically low interest rates means now might be a good time for house-hunters to purchase a home as opposed to renting.
Statistics from District Data indicate that rental rates across Melbourne have increased by an average of 6% per annum over the last decade, while the average monthly mortgage repayment has grown by a mere 3% per annum over the same period.
“The data indicates that it’s becoming increasingly attractive to purchase a property and pay a mortgage than it was a decade ago,” Teplin said. “While everyone is talking about rising house prices, it’s nothing compared to the rate at which rents are increasing.
“Of course there is the initial barrier of saving for a deposit; no one is disputing this fact. However, looking at the numbers and the current state of the market, within say five years, the benefits of buying outweigh renting on numerous levels.
“We are seeing many purchasers now enter the market at a price they can afford, say with a one-bedroom apartment, then in a few years’ time use the leverage from the capital growth to borrow against a second property. It’s a very clever way to work their way up the property ladder without setting the benchmark too high or out of reach for the first purchase.”
Daniel Slomoi, managing director at District Data, said many people blindly assume that renting is always the cheaper option, even in the long run.
“Whilst that might be the case in some instances, it is a worthwhile exercise running the numbers and researching both options, as there are many areas in Melbourne and Sydney where purchasing a property is cheaper than paying rent,” Slomoi said.
“Particularly in the current environment, with low interest rates, a booming rental market and long-term evidence of capital growth, would-be renters should definitely consider their purchasing options and assess whether the equity in real estate will provide them with financial security in the future.”
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