Rent or Buy?

Read More

Property prices have fallen significantly over the last two years making houses much more affordable than they have been for some time. Despite this, buyers are still in short supply. The most logical reason for this is that buyers expect prices to either continue dropping or to at least stay flat for some time. This creates a dilemma for first home buyers and people moving towns; is it better to rent or buy in the short term?

 Whether you are buying a property to live in or to rent to someone else, there are two factors to consider. The first is the extra income you will have if you buy, either because you are no longer paying rent or because you renting to someone else. The second is the capital gain you can expect from owning the property. Property prices are not expected to increase significantly over the next 3-5 years. At the same time, rents are still low in comparison with property prices. If you can rent a property for an annual rent of 5% of its market value, why would you borrow money to buy when the interest rate is around 7% and there is little prospect of capital gain?

 In the short term, with no expectation of property prices increasing, renting makes sense unless you can buy a property well below market value. For first home buyers, this allows more time to save a bigger house deposit and for others who have sold, it is an opportunity to temporarily live more cheaply in the kind of house that might previously have been out of reach to buy.

 In the long term, it makes sense to buy a property for security and peace of mind and to ensure you don’t get left behind when prices inevitably rise again.

Related Articles

Investment
Liz Koh

Responsible Investing

There is a worldwide trend for investors to want to make a positive contribution to the world by investing in companies that are socially and environmentally responsible. If you are passionate about the effects of climate change, the scarcity of food and water, and social or environmental policies in general, then you will no doubt wish to ensure that the companies in which you invest are going about their business in a manner that is consistent with your views.

Read More »

Stay in the loop

Keep up to date with the latest developments from Enrich Retirement