Economist says it's cheaper to rent - What are your views?

[Perry]

As Far As I Know

Ahhh, means testing (income) and asset testing (house)
are different things, Eri.

Means testing of Nat Super already exists, albeit in some
limited form. I.e. when one spousal partner reaches 65
(and qualifies ipso facto) there is an option to include
a 'dependant' (not working) spouse of over 55. In that
case there is a means test.

If the dependant spouse of over 55 is not included in
the pension application, there is no means test. Any
means test finishes when the over-55 years-of-age
dependant spouse makes it to 65 and therefore qualifies
as-of-right.

That's how I understand it presently, anyway.

[eri]

whatever it is now

will change

[flyernzl]

Which is why, when/if they bring in a means test, there will be a surge of 64-year-olds heading off for first-class luxury cost-no-object round-the-world P & O cruises.

[cube]

Friends have just brought a lovely log house on the outskirts of Seattle with mortgage payments about 1/4 of the rent payments for a 2-bed city appartment, so its not always cheaper to rent!

[flyernzl]

Nor should it be.
Logically, renting a house cheaper than buying is an aberration.
Think about the cost of renting a car/chainsaw/lawnmower against the daily costs of owning one.

[spaceman]

^Logically??????....Logic is a funny thing

Logically why would you rent if it was more expensive than owning?????.....thus renting a house should always be cheaper than owning n'est ce pas?????

Cheers
Spaceman

[Wayne]

Logically why would you rent if it was more expensive than owning?????

People rent items all the time - rent truck to get them over a short term surge in work or because they have better use for the capital. Rent a house while your new one is being built. Rent because you are new to the area - all nothing to do with logic.

[Maccachic]

Aren't the people pushing american investments at the moment saying that owing is cheaper than renting?

[spaceman]

......... all nothing to do with logic.

That was kind of my point

Cheers
Spaceman

[Simmo]

Punch some numbers into this and it'll give you an idea

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

[Keys]

Interesting. $500pw rent on a $400k house makes the break even point somewhere around 15 years. Imagine that! The calculator sorts out inflation as well. BTW, I used a mortgage interest rate of 7.5%.

*nods head sagely*

Yes, renting is definitely better (for those who will die early).

[Austrokiwi]

Interesting. $500pw rent on a $400k house makes the break even point somewhere around 15 years. Imagine that! The calculator sorts out inflation as well. BTW, I used a mortgage interest rate of 7.5%.

*nods head sagely*

Yes, renting is definitely better (for those who will die early).

Used the same calculated used the same figures but adjusted the average house price change to +4%. In that scenario buying becomes better than renting in 10 years.

[Jamesr]

Does that mean it's a good time for selling property? Or is that statement too general?

[muppet]

Depends on where you are selling?

[Contrail]

Interesting. $500pw rent on a $400k house makes the break even point somewhere around 15 years. Imagine that! The calculator sorts out inflation as well. BTW, I used a mortgage interest rate of 7.5%.

*nods head sagely*

Yes, renting is definitely better (for those who will die early).

How are you getting that result?

500 p/w
400,000 mortgage with 20% deposit
Presume home value growth of 2%
mortgage say 6%
tax = 0
rent increase 3%

You lose about $20,000 p/y renting