RP Data’s findings – Buying vs Renting

Posted by Daniel Joseph

Last week RP Data released its new buy vs rent report. Unfortunately, many of you would have missed this report as like our weekly newsletter I am sure RP Data’s email gets forwarded straight into your deleted items or into the ‘too long basket’ or the ‘I’ll read later but never do’ folder. These emails are chock full of information and stats that are related directly to your industry, and your job so do read them.

Getting back on topic, RP Data found that ‘it is cheaper to RENT than buy in 93% of locations’ throughout Australia. That means there are only 388 localities out of 5,386 where it is cheaper to buy than rent. The next time you have a client who is looking to buy a property to live in, they are most likely going to be paying more in repayments than if they lived in the same property and paid rent. Blue Wealth has been a strong proponent of renting where you want to live and buying an investment in a good growth area to get a foot onto the property ladder. Check out our buy vs renting video here if you have not yet seen it. In many cases the area you want to buy in might not have the best growth prospects, so your client would be saddled with a large mortgage on a poor performing asset.

However, with all reports the devil is in the detail. When looking at the report, if the client were to spend $50 more a week that list of 388 expands to 1,031 localities, and if they were to use an interest only loan that list then blows out to 1,975 localities. What these numbers tell us is that if you stretch the budget it can be cheaper to buy than rent in 36% of the available localities in Australia. To do this you would obviously have to sacrifice some lifestyle opportunities such as going out once a fortnight for dinner except once or twice during the week, spend a day at the park instead of going to the Easter Show with the kids or maybe drive down the coast for a holiday instead of flying the family to Bali for a two week getaway.

There are some obvious downsides to renting, such as the uncertainty every year of having to move or the classic of not being able to put a nail in the wall to hang the family portrait, but from a lifestyle and financial position renting seems to be the better choice.

Posted by Daniel Joseph, on 21st Feb 2013