Is Renting Really Cheaper in the Long Run?

Housing affordability is a national issue, and it’s not getting any easier.

While owning your own home is still the Australian Dream, the reality is that the entry cost, even for first home buyers, can be challenging when you consider the typical size of the deposit you’re required to have in order to enter the market.

Renting vs owning. Which is cheaper?

Many Australians believe they’d feel more comfortable to keep renting.

But renting does not give you security, independence or peace of mind. And rents have a nasty habit of rising.

On a cash flow basis, renting a 2-bedroom townhouse or apartment is cheaper than buying a $600,000 home. The cashflow difference could be as much as $22,000 per year.

However, when you rent, you are paying off someone else’s property investment, not your own. Rents often increase every year, and when landlords sell, you have to move.

Which means you don’t have control over your home, your life, or your security.

How can I make buying my own home a viable option?

Buying a home is not financially viable for everyone, but if you earn above-average income and you genuinely want to own your own home, there is a way you can.

Suppose for a moment you could buy that $600,000 home with a 1% deposit and build your equity from 1% to 30% over 5 years?

That would be $220,346 of equity*, security and peace of mind. Here’s what it could look like.

When you consider the opportunity of building wealth versus paying off your landlord’s property investment for them, then renting might only seem like a safer option until you see it’s arguably not the more secure way to live long term.