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The question of whether rent or buy has made its way into the headlines lately, with it becoming clear that many people can’t afford to take that first step into home ownership. When given the choice of renting in their preferred area or buying further from their favoured Liverpool spot, it seems that many people interviewed from the Generation Y age group valued lifestyle over home ownership. So why is it that we view home ownership so highly in Australia, and treat it almost as an Aussie right of passage? Are we better off forgetting about owning our own homes, and enjoy the lifestyle perks of renting wherever the wind blows us?
While renting may be more affordable in the short term, most financial advisors favour buying property as it equates to forced savings. The more you pay off your home, the more equity you build for your future. Renting may seem like the cheaper and easier option, although there very few benefits to be gained from renting long term.
When looking to the future, it pays to look ahead at what will happen to the average Australian’s income and average monthly rental payment. If you consider that the average wage will increase gradually each year, by the time you’re into the home stretch of your mortgage repayments, you will be saving more and more with every repayment. However, when renting this won’t be the case. Annual rent increases will eat into the savings you would otherwise be making with an increased salary, ensuring that you will not only be missing out on the forced savings of putting your well earned dollars towards your own asset each month, but the gap between your monthly salary and your monthly rent payments will be far less than it would be between your salary and mortgage repayments.
We do understand that some people are simply not in the position to buy right now. However, we’d love to hear from those who are in the position but do not want to compromise on lifestyle or area so choose to continue renting. We’d also love to hear from those who are taking the necessary steps to enter home ownership, to find out what it was that made you decide now was the time. Please share your thoughts and/or Liverpool real estate experiences in the comments below.