Renting Versus Buying in the Current Market
It’s the perennial quandary facing many potential first homebuyers. Is it better to continue renting or to take the plunge and buy a property?
It’s the perennial quandary facing many potential first homebuyers. Is it better to continue renting or to take the plunge and buy a property? In normal times there are so many factors to consider, and in these unique COVID-19 times, even more unknowns and variables.
Now that interest rates are at historic lows and likely to stay there for some time to come, the costs of borrowing have been reduced. Add to lower mortgage repayments, the new Government subsidies including Homebuilder and the First Home Buyer scheme, buying a property has never been more affordable. After a period of price growth in the second half of 2019 and early in 2020, prices have stabilised, and in some areas softened, making buying that first home even more of a possibility. A number of long-term renters have taken advantage of these conditions to make a home purchase for the first time.
A long-term renter, Freya Nichol purchased her first home at the beginning of the initial lockdown period in March. Far from being a spur of the moment decision, she had undertaken an enormous amount of research over the past 12 months, which included attending and bidding at a number of auctions. She noticed prices were rising quite rapidly in the second half of 2019 and at the start of this year. While there was speculation at the beginning of the COVID-19 crisis that prices may fall, Freya also realised that stock was likely to dry up as people decided to withdraw their properties or not to list at all. When she found the ideal property in South Yarra, an older style 2-bedroom apartment, she knew it was the type of property that would always be in demand, so a great long-term investment. Freya made a fair offer before auction, which was enough to buy the apartment. Although she is paying marginally more in mortgage repayments than she was renting, the residence is larger and in the ideal location for her lifestyle and work. As a renter, there is a lack of control over dealing with repairs, improvements and inspections. Now in complete control, Freya is more than happy to be a homeowner rather than a renter.
After a period of price growth in the second half of 2019 and early in 2020, prices have stabilised, and in some areas softened, making buying that first home even more of a possibility.
For Nina McHardy, buying her Rockley Rd, South Yarra apartment was a more opportunistic decision although she had been keeping an eye on the market for some time. When an apartment in the block next door came on the market it was too good to pass up. She already loved the South Yarra lifestyle so had decided to live there long term. In the period after the COVID-19 outbreak, Nina has seen the supply of apartments on the market seriously decline so she was relieved to have already purchased. While the cost of her mortgage is more than she was paying in rent, the apartment is much more spacious which is a distinct advantage now that she is spending so much of her time at home. It’s also comforting to know that the payments she makes each month are to pay off her own mortgage rather than paying off someone else’s investment. Any little improvements she makes along the way will only add value to her own investment. Much like Freya, Nina has bought for the long term and is confident of capital growth.
In any market, and especially in such a variable market as the one we are in today, buying property is for the long term. It should always align with future prospects at work, family plans and other lifestyle factors.