Consider these statistics…
The decision to rent or buy is always a big one. The traditional strategy of buying a first house and then moving up to the ideal home as your income and equity grows is fast being replaced by the initial purchase of an investment property. However, the alternative of renting indefinitely while you save to buy is becoming equally difficult because of escalating rents and an historic squeeze on vacancies.
If you’ve wondered whether you’re ahead by renting or better off buying, consider these statistics.
- The median net wealth of a renting household is $55,265 whereas homeowners have nine times as much – $487,183
- Renters comprise 28.7 per cent of the nation’s households but have only 6.3 per cent of the nation’s wealth
- Australians who own their home are worth 13 times more than renters – $734,394
So, despite arguments to the contrary that emerge from time to time, real estate ownership has made the average Australian second only to Swiss residents as the wealthiest in the world.
So how do you take the step from renting to buying your first home?
- Approach the market with a sound five-year plan. Get into the market, pay down the mortgage, and establish equity in the home as a basis for long-term financial security and flexibility.
- Budget for extras. As well as a solid deposit, have money set aside to cover insurance, routine maintenance costs and to meet mortgage payments for several months if something goes wrong.
- Don’t worry about the market. Your focus should be on building a deposit while looking for the property that matches your lifestyle and budget.
- Compromise. Your perfect home is likely to be out of reach for now, so focus on hunting down a property that has solid real estate attributes – good location, off-street parking, security, quality finishes and proximity to restaurants and transport. Choose something that will suit your needs for the next five years or so while you build up equity and prepare for the next phase of home ownership.
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