27 Jan 2017
It pays to weigh up your options
Sydney is in the top 10 least affordable major housing markets, according to Demographia's 13th annual International Housing Affordability Survey.
And according to a recent report from CoreLogic and the Australian National University, the gap between household income and the money required for a 20 per cent housing deposit is increasing.
What's more, the Property Council reports that the average amount paid in stamp duty has increased by between 527 per cent and 795 per cent across the states in territories in the past 20 years, throwing up a massive barrier to home ownership.1
With statistics like that it's no wonder Australians are beginning to see the sunny side of renting. Turning your back on the 'for sale' sign and joining the rental market does have its benefits:
- you're not responsible for the costs of maintaining a home
- you're not tied to one area should you wish to explore somewhere new
- you can live in an area you might not otherwise be able to afford
- if you're retired, you won't be carrying a worrying amount of debt and can spend your money where you choose to enjoy it
- if you still wish to buy eventually, renting can give you time to save up a healthy deposit.
But of course where there are pros, there are cons:
- you're paying someone else's mortgage
- there's no certainty your landlord will renew the lease at the end of its term, so you may be forced to move more often than you'd like
- you'll need to request permission to make changes to the property, making it difficult to put your own stamp on things
- you might not be able to find a property that suits all your needs in an area where you want to live.
Safe as houses
Of course, there's a lot to be said for the security that, more often than not, comes with property investment. Owning your own bricks and mortar is essentially a safe investment and, according to a recent report from Real Estate View – you'll typically benefit from steady capital growth as well as regular monthly returns if you ever decide to rent it out.2
So, if you can find an area in which you can afford to invest, buying might be for you because:
- mortgage repayments can contribute to long-term wealth accumulation
- you can change the property by renovating it the way you want, subject to council approval, and even add value
- it can offer you security in your place of residence
- unlike other investments, you are in full control of your property; you make all the decisions.
However, there are also arguments against buying:
- the property market does fluctuate, so there could come a time where you want to sell and can't secure the profitable asking price you've been counting on
- there are many additional upfront costs – including stamp duty, the deposit and legal and conveyance fees. You will also need to consider the ongoing costs of a property investment, such as maintenance and repairs, insurance, land tax, water and council rates
- should you need to sell-up fast, it's not as quick as it is to sell other investments like shares
- if you're retired, having a mortgage looming over your head might not bode well for your next overseas trip or holiday with the grandkids.
Ready to buy?
Once you've assessed the pros and cons of buying and renting and decide buying a home is the right decision for you, then it's time to get your ducks in a row.
Make sure you have everything you need in place when you start your search for the Australian dream: a healthy deposit and funds to cover the other costs that come with buying, and pre-approval for a loan so you know your limits and can make an offer as soon as you find your dream home.
We're here to help
Our experienced team is available to help you navigate the maze of home loan options. Call 13 62 27 to speak to a home loan specialist.