Home ownership is an important milestone for many. But, it’s also something that people can’t and in some cases, don’t aspire to achieve.
The 2016 Census data shows that 67% of Australian households were homeowners (35% with a mortgage) and 32% were renters. The home ownership rate of 30 to 34 year olds declined from 64% in 1971 to 50% in 2016.
In this article, we’ll see how home ownership stacks up against renting a property.
Benefits and drawbacks of renting a home
A big benefit of renting is that you have a relatively fixed cost for housing. You’ll know exactly how much to pay and for how long. With home ownership, you’re more likely to have both regular costs, like your mortgage, and expected, variable costs, like maintenance costs.
Renting also gives you the flexibility to move places. If you’re looking to move closer to your workplace or family, you can do so more easily when you’re not invested in a place long term. Also, with ownership, moving usually takes more time because houses take time to sell.
Another benefit of renting is that you may get access to some facilities, like a gym or swimming pool, which would be expensive to have in your own home.
On the flipside, you don’t have control over how long you can live in the property: the landlord may choose to not renew your contract. Also, you have to follow certain rules and regulations set by the property owner.
Benefits and drawbacks of buying a home
Home ownership allows you to build equity. Years down the line, the market value of the property may have increased enough to generate a nice return on your investment.
Another big benefit of owning a property is that you can customize everything, from the lighting and colors to the rooms and outdoors. And, as your family grows, you can add and remove sections according to your needs.
A drawback of home ownership is that you’re responsible for all the costs associated with the house along with the mortgage payments. The maintenance and repair costs of the house can be significant overtime. Maintaining a home is also not only about cost but it also needs your time.
One goal with owning a home is that its value will be greater than the total principal, interest and other costs. But, the market value of homes depends on factors that can change overtime. The neighbourhood, economic conditions, and other purchase and rental options are important factors.
Should you buy or rent?
There’s no right answer to whether you should buy or rent. The answer varies from person to person – it all depends on your lifestyle, income, and life goals.