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Cheaper to buy than rent

Discussion in 'General Property Chat' started by MTR, 4th May, 2016.

  1. MTR

    MTR Well-Known Member Premium Member

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    I think we all just dodged a bullet for the moment, with another interest rate drop, my lowest will be 3.87% who would have thought interest rates would go this low.

    We may now see more FHB in the market, lower price points but it makes sense cheaper to buy than rent.

    Thoughts??

    MTR:)
     
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  2. Xenia

    Xenia Adelaide Property Manager Business Member

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    In certain areas it has always been cheaper to buy than rent.

    The reason why people will rent rather than buy - creating cashflow positve circumstances for someone else, is because they do not meet the income servacibilty requirements to be able to purchase.
     
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  3. D.T.

    D.T. Adelaide Property Manager Business Member

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    Some people simply like renting, gives them a sense of flexibility.

    Its also financially better as allows more of your income to be used to service more mortgages.

    Or some simply can't save up a deposit for various reasons.
     
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  4. Plutus

    Plutus Well-Known Member

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    Or:

    • Because living in a PPOR is far less tax advantaged than rentvesting (owning and living elsewhere)
    • Because houses are an illiquid asset with high purchase and sale costs and they may not be planning on staying in that property for a long enough time to recover that expense
    • Because residential housing in some markets has boomed recently and not everyone is willing to take on a few hundred thousand in debt & max out their loan serviceability during a historically low interest rate period to take a punt on buying into an asset class that many people believe is potentially at the top of its growth cycle & that state and federal governments are beginning to take an interest in lowering the price of, which is the double edged sort of investing in an asset class such as shelter which is often considered a necessity.
    There are plenty of scenarios where "just buy" is a really stupid move.

    Personally I don't get why a lot more people in Sydney & Melb above the $600k mark aren't renting, the yields are currently awful.
     
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  5. albanga

    albanga Well-Known Member

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    Interested why we would see more FHB in the market?
    This interest rate drop will do very little to servicing and doesn't mean anything to the deposit they are likely struggling to save.

    If anything this rate drop will further remove FHB from the market as those who can service greater debt and have savings/equity already in place can/will likely push themselves a bit further in buying.

    Personally I see this rate cut as significant as its the first time we will see SVR's starting with a 3!
    This may have a greater psychology effect to some buyers than what it actually means in repayments. It could be the .99cent effect :)
     
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  6. sanj

    sanj Well-Known Member

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    Thats only 1 reason. there are plenty of people who rent, myself and a fair few friends, because it isn't worth tying up the capital in a PPOR when there are better returns available elsewhere.

    I've got 5 friends under 35 who are worth between $5m-10m and 4 of them rent.

    I'm 34 this year and in the 12 years or so since I moved out of home I've lived in a PPOR for about 18 months and rented the rest of the time.

    a couple of years ago I rented a beautiful fully furnished apartment for $920/wk that the owner paid $1.4m, it would have been madness for me to buy it. a friend in melbourne was paying $900/1000/wk shared between 3 people for a townhouse in toorak, it sold recently for $1.6m or so. again, it would have been madness to buy it.
     
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  7. Propin

    Propin Well-Known Member

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    I know all my tenants don't want the responsibility of a mortgage so I'm not expecting the change to mean much to them
     
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  8. MTR

    MTR Well-Known Member Premium Member

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    My point was that because interest rates are at an all time low we may see market sentiment change somewhat, it may help investors as we may see more buyers come back into the market??
     
  9. neK

    neK Well-Known Member

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    Few reasons. It applies to some people, not everyone.

    1. I can take a hammer to wherever I want when i want.
    2. I don't need to worry about getting kicked out if the owner decides they want the house back.
    3. No random inspections.
    4. Land tax. (For me this is the biggest one, if i moved out of my PPR and rented i would hit with an extra $10k land tax each year).
     
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  10. Xenia

    Xenia Adelaide Property Manager Business Member

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    Smart thing to do, I think they call this rentvesting.
     
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  11. joel

    joel Well-Known Member

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    I rent and love it:
    1. I dont feel the need to compulsively smash things with a hammer so im all good there
    2. If I get kicked out I'd just upgrade
    3. My inspections arent random, theyre 3 monthly
     
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  12. neK

    neK Well-Known Member

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    I find moving a pain in the ass.
    I can't imagine moving with kids.
    (I also horde a lot, so that's probably the source of the moving problem. Lol)
     
  13. citystar

    citystar Well-Known Member

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    I was content to rent my entire life while growing my investment portfolio however the wife had other ideas about that. We purchased and renovated our place and since then the suburb has increased in value due to high level of property sales. The neighborhood looks completely different as houses are renovated in preparation for sale. I'm glad the boss insisted on buying the house because the equity from the increase in value has allowed us to acquire more IP's then we would otherwise have been able to.
     
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  14. Plutus

    Plutus Well-Known Member

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    Going through this at the moment. Supposedly there is more to housing than spreadsheet sums, intangibles like "able to have a pet" and "having a home we can personalise".

    I'm still making sure whatever we get would make sense as an IP in a few years.
     
  15. sash

    sash Well-Known Member

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    Woo hooo...with this...that will put another 10-12k in my pocket pa....another 0.25 is another 10-12k...loving it!

    That is on top of the 8k in savings by me fixing about 700k.
     
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  16. chylld

    chylld Well-Known Member

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    Well said. There is more to life than a spreadsheet.

    *goes back to tinker with managed fund worksheet*
    *make note in todo worksheet to create a weighted happiness indicator formula*
     
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  17. EN710

    EN710 Well-Known Member

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    It's a good time to get loan but the question is, how many can afford saving for the deposit? :-\
     
  18. SOULFLY3

    SOULFLY3 Well-Known Member

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    I rent due to the fact I had to compromise with the missus as she is an air hostess, and travelling 1 1/2 hour + each way was taking a toll and not really fair..

    We decided to move half way and if I had to buy anything remotely decent for future development in the east = massive dollars $$$

    I would love to reno etc as am a tradesmen but just too expensive to buy.
    If we were still in the south east would definitely consider buy & reno
    Btw
    Im against the traffic so I dont mind too much
     
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  19. SirDingo

    SirDingo Well-Known Member

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    We're moving back to Oz in February and this is one of the decisions we have to make. Buying would be 'nice' however, rentvesting makes good financial sense for us. Moving into one of our IPs for a year or so could also prove advantageous too. In the areas where we would like to live, renting is generally less expensive than buying.

    I'm interested myself to find out what we end up doing ;)
     
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  20. wylie

    wylie Moderator Staff Member

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    I'm fairly sure point 1 meant "can renovate or change" rather than the desire to go around smashing things :p.
     
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