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Home Ownership - Does It Make Financial Sense?

In recent times we have seen housing prices in our major cities, reach levels which have put the dream of home ownership beyond many Australians. A recent survey found that home ownership was not a priority for 1 in 3 Australians. Here we take a look at the issue and points out some of the pros and cons of owning vs renting your own home.

There is a saying: rent money is dead money. But with the current state of the housing market, is this still the case for those that living in our expensive cities? We continue to see skyrocketing homes prices in Sydney and Melbourne. Could it make better financial sense for some to continue renting rather than buying a house?

We believe there’s no simple answer. There’s a lot to consider. We will take a look at both the pros and cons of renting, to help you decide which is best for you. Firstly, we’ll focus on the downsides of renting over buying, and consider some important reasons why there is a large number of young Aussie’s aren’t yet ready to let go of the dream of owning their own home.


Lack of Stability

Renting will never provide the same stability as owning your own place. Most landlords will offer a lease agreement for a 12-month period, which when you think about it, isn’t really a long time. Some renters are able to secure longer leases, but these are a rare find. Those that aren’t so lucky may find themselves having to move houses within a year’s time in the event that the landlord chooses to sell the house or decides they’d like to occupy it. Having to pack up your whole life and find a new home, sometimes with no more than two months’ notice, can be an enormous disruption. It’s even worse for those who have kids.

Lack of Control

The lack of control is something that many tenants struggle with. For most people, they quickly begin to see the property as their home. Yet because someone else owns the house, there’s a long list of rules and regulations regarding what they can and can’t do. When it comes to repairs, there’s a range of things the landlord is responsible for keeping well maintained, like the water system, the toilet system and essential services (hot water, heating and air-conditioning, etc). Should these things breakdown, the landlord or property manager is responsible for seeing to their repair. However, this isn’t always as straightforward as it sounds.

No Investment

While renting may seem to be the more cost-effective option in the short term, in ten years’ time you’ll have nothing to show for those tens of thousands of dollars you’ve spent paying off someone else’s mortgage. Data from the Australian Bureau of Statistics (ABS) shows that house prices in Melbourne and Sydney have increased 10% in the last 12 months, but there’s no solid evidence to suggest that prices will drop anytime soon. Likewise, there’s no way to guarantee that prices won’t continue to grow.


Despite the lack of benefit from a long term investment, there are a number of positives to renting that may appeal – depending on your financial and lifestyle objectives; these are some of the many benefits offered to tenants.


One of the key aspects that attract people to rental properties is the sort of lifestyle that renting can afford. For those who want to live close to the city, sometimes renting can be their best bet. Not only can rental prices be considerably lower than the average mortgage repayment, but living close to the city can also mean substantial savings in terms of transport. If public transport is readily available, there may be no need for a car which means you’ll save on petrol, parking, tolls and registration. We have seen some clients choosing to buy a rental property in the area they can afford, but rather than sacrifice their lifestyle, continue to rent in their preferred area closer to the city.

No Additional Fees

Most rental agreements will require tenants to pay an agreed upon sum at the beginning of each month, and a refundable bond at the commencement of the lease period. And that’s it! On the other hand, when you own a home, you’re not only required to pay your mortgage, but you may also be responsible for a whole host of other expenses too. Homeowners pay stamp duty, council rates, body corporate fees and more. It doesn’t take long for these figures to start to add up. Unlike tenants who can rely on their landlords to cover the cost of certain necessary repairs, homeowners must front the full cost of any required maintenance themselves.

Flexible Cash Flow

For many, buying their first home can mean handing over a large chunk of their savings to go towards a deposit. By choosing to rent, you can hold on to that deposit, and even save more by renting for a lower price than you would while repaying a mortgage. Having a more flexible cash flow opens you up to a world of possibilities and other options to start making your money work for you. You could consider investing this surplus elsewhere and growing your liquid assets, whether it be in shares, managed funds, or Super.

So which is right for you? Whether you’re a renter looking to buy, or a homeowner wanting to explore your options, getting advice from a professional, qualified financial adviser can help you make the right decision for you own financial and lifestyle objectives.

Call us on 1300 861 143 for an appointment.


This information is current as at 16/08/17. This article has been prepared by Heart1Stop, a social media brand owned by Heart Mortgage Services and Heart Financial Advisers. The information contained in this article is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The views expressed here are not those of Heart1stop, Heart Mortgage Services, Heart Financial Advisers, shareholders, directors or staff and associated contractors and business associates. This article has been prepared without taking into account any person’s objectives, financial situation or needs. Because of this, you should, before acting on any information contained in this article, consider its appropriateness, having regard to your objectives, financial situation or needs. Any taxation information contained in this article is a general statement and should only be used as a guide. It does not constitute taxation advice and is based on current laws and their interpretation. Each individual’s situation may differ, and you should seek independent professional taxation advice on any taxation matters. While the information contained in this article may contain or be based on information obtained from sources believed to be reliable, it may not have been independently verified. Where information contained in this publication contains material provided directly by third parties it is given in good faith and has been derived from sources believed to be accurate at its issue date. It is not the intention of Heart1Stop or Heart Mortgage Services and Heart Financial Advisers that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. To the maximum extent permitted by law: no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up to date or fit for any purpose; and no party of Heart1Stop or associated entities as mentioned is in any way liable to you (including for negligence) in respect of any reliance upon such information. This article may also contain links to websites operated by third parties ("Third Parties") who are not related to Heart1Stop. These links are provided for convenience only and do not represent any endorsement or approval by us.

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