Australia is one country that has
witnessed a sharp increase in the demand for property. There have been various
debates on whether to continue renting or buy your house. The house prices have been estimated to increase
at a rate of about 2.4% per year not taking into consideration the inflation
rate. By this estimate, one would benefit more from a mortgage over a period of
about ten years as compared to renting for the same amount of time.
However taking into consideration
the rate of inflation, the growth rate may decrease to about 1.7 percent thus
one would take 30 years or more to break even.
Apart from inflation, there are other factors that influence the growth
of property prices, and these include the Australiahome loan rates, repayment of home
loan Australia loans and other ownership costs. All the above will
influence one’s decision to decide to buy or rent and will also affect the
bank’s mortgage rate.
So what is the advantage of a home loan as opposed to renting?
The primary bone of contention in
this debate is the cost effectiveness of either option. How much disposable
income will one get at the end of the day? When one is renting a house, the
money spent on rent only benefits the landlord but does not in any way make the
tenant’s financial situation better. This is like money down the drain. When
one buys a house, the monthly repayments that are equivalent to the rent,
reduce the remaining balance on the house thus pushes the tenant closer to full
ownership of the house.
The rate of inflation has
affected a couple of cities such that buying property in this area may end up
making you poorer. According to Cameron Kusher the RP data analyst, the
location of the property plays a vital role in deciding between the two
options. He gives an example of some suburbs in Melbourne and Sydney where the
growth rate is placed at 2.9 percent in excess of the inflation over the last
15 -20 years. Therefore getting a property in these areas is bound to be more
profitable.
Some analysts also argue that
while many people would like to own property, they are unable to raise the
deposit. The paradox of the situation is that these same people are living in
areas closer to the urban areas thus increasing the living cost. Martin Beard,
a former real estate agent, sold off his four properties and opted to rent. He
attributes his decision to the amount of debt that one bears when trying to own
property. He says that he enjoys the convenience of renting in a neat suburb
that is also close to social amenities
At the end of the day, those who
opt to buy rather than rent property have enjoyed certain benefits. They are
like security of tenure, the freedom to make adjustments in the house and the
pure comfort of coming to your home.
So the debate between the two
options is still ongoing but one has to decide what will work for them in the
long run. Take your time to consult a mortgage broker for guidance on the whole
process of applying for a mortgage and the cost implications of a home loan Australia.
