AS strange as it sounds, renting could be more lucrative than buying a home, David and Libby Koch write.
Australians are enduring a housing affordability double whammy of high property values and high rents. But there could be an interesting alternative.
The Australian residential property market currently defies all investment logic and is likely to remain that way for the time being.
Compared with the rest of the world, our residential property prices are 10-30 per cent more expensive.
House prices overseas have plunged over the past year but ours have stayed steady (and improved in some areas) while a shortage of rental property has kept rents up. It’s all because of a lack of supply.
Banks have tightened their credit rules and are not lending as much to developers who, in turn, aren’t building enough new developments.
On the demand side, record low interest rates and the boost to the First Home Owner Grant have encouraged people to buy.
It’s this imbalance which has kept values up. Investors, shocked by the global financial crisis, have also kept out of the market which has meant a shortage in rental property which has pushed up rents.
This double whammy is likely to stay that way at least until the next economic downturn. In the short term, the banks will hopefully start to finance more property developments and help ease the supply shortage.
But the prospect of rising interest rates and a wind-down in the First Home Owner Grant will start to add to the financial strain.
Buyers really are in a bind. We understand Australians love their bricks and mortar but maybe we take that love affair a little too far.
The answer could be renting. We know this could shock people, and we know rents are high, but hear us out.
The key to this option is having the discipline to invest (and not spend) the difference between your rent and potential mortgage repayments on a similar property.
Read more ...
Jenny
Australians are enduring a housing affordability double whammy of high property values and high rents. But there could be an interesting alternative.
The Australian residential property market currently defies all investment logic and is likely to remain that way for the time being.
Compared with the rest of the world, our residential property prices are 10-30 per cent more expensive.
House prices overseas have plunged over the past year but ours have stayed steady (and improved in some areas) while a shortage of rental property has kept rents up. It’s all because of a lack of supply.
Banks have tightened their credit rules and are not lending as much to developers who, in turn, aren’t building enough new developments.
On the demand side, record low interest rates and the boost to the First Home Owner Grant have encouraged people to buy.
It’s this imbalance which has kept values up. Investors, shocked by the global financial crisis, have also kept out of the market which has meant a shortage in rental property which has pushed up rents.
This double whammy is likely to stay that way at least until the next economic downturn. In the short term, the banks will hopefully start to finance more property developments and help ease the supply shortage.
But the prospect of rising interest rates and a wind-down in the First Home Owner Grant will start to add to the financial strain.
Buyers really are in a bind. We understand Australians love their bricks and mortar but maybe we take that love affair a little too far.
The answer could be renting. We know this could shock people, and we know rents are high, but hear us out.
The key to this option is having the discipline to invest (and not spend) the difference between your rent and potential mortgage repayments on a similar property.
Read more ...
Jenny
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