‘It is quite different’: Has the cost of renting got you considering buying instead?

Consistent rent rises have pushed some tenants to start seriously considering whether they would be better off buying their first homes sooner instead. 

The Domain Rent Report for the September quarter revealed a record-long period of consistent rental growth, after prices increased for the 10th consecutive quarter for homes, and ninth for units, leaving the national median asking rent for both at $600 a week. 

Some tenants who were faced with non-negotiable rent increases during this time are, as a result, considering entering the property market sooner, with the gap decreasing between mortgage repayments and rental costs. 

However, the process of becoming a first-home buyer isn’t as simple as just breaking a lease once you find the perfect house. There are a number of things to consider before you commit to the change. 

The lifestyle opportunities of renting

Property managers emphasise the flexibility and lifestyle that can come with renting a property instead of owning one. 

Casey Joseph of Ray White says it is a great way for people to experience living in different areas around the country, and to find their perfect location. 

“Priorities are shifting, and [young people] place a greater value on life experiences than past generations,” she says. “They want to travel regularly, dine out … experiences older generations generally saw as infrequent luxuries.

“Renting provides a level of freedom that home ownership might not always offer … [home owners] might be at their financial limit, whereas renting might allow you to pursue other priorities, such as regular travel, or allow you to own an investment property.”

But whether renting is right for you really comes down to a person’s intentions, John Graham of Hugo Alexander Property Group says. 

“After strict border shutdowns and consistent lockdowns, we are finding people are actively moving around the country in an effort to find a happier balance within their life, whether that be moving closer to loved ones, relocating for a new job or a simple tree change,” he says. 

Do your homework before making the renter-to-owner switch

For tenants who are encouraged to take their first steps into the market, there are things that are important to understand before you jump in. 

The number one priority first-home buyers should consider is figuring out whether or not you are in a position to afford a home and its associated costs, Liam McDevitt of Ray White says. The difference in costs between renting and owning is more than just weekly repayments.

The best place to start is by speaking to a lender or mortgage broker, who will calculate the maximum loan amount available to you based on factors including your income, savings, expenses and credit history.

“These people will go on about affordability and talk you through potential interest rate rises, which will help you understand where you stand,” he says. 

“It’s really important to make sure you already have that pre-approval, and that you actually do understand how mortgages work.

“It is quite different to renting, and a lot of the time current tenants don’t know of the extra costs that are associated with stamp duty, maintenance costs and council rates.”

Government assistance in the form of grants and schemes can be a great way to help you build up a deposit. 

These vary between states and territories, but it’s important to fully understand their terms and conditions before beginning a property search.

Information on what is available where you live can be found here. 

It is also important to remember that your first home will not necessarily be your forever home, McDevitt adds. 

“It’s more about getting on the property ladder, making the first step, and being patient and living within your realistic means,” he says.

“Personally I would recommend [buying a property], and encourage it because it is a long-term investment. Look at it through the eyes of a potential investor, too: has it got three bedrooms, two bathrooms, is it in a sought-after location, is it rentable after the fact?”

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