admin-ajax.php

The great debate: to be a tenant or a home owner?

Low rental vacancy rates, rising rents, healthy immigration and robust competition between tenants are excellent market conditions for the one in seven Australian tax payers who own an investment property.

On the flipside, it is a highly undesirable situation for tenants.

Many have gone through or are in the process of inspecting rental property after rental property as one of scores of hopeful applicants, bidding fiercely for a roof over their head, enduring regular rent rises and preparing for the increasing cost involved with not being their own landlord.

In a recent bulletin Mortgage Choice spokesperson Kristy Sheppard says, “RP Data recently reported capital city rents increased by 4.2% in 2010 and commented that they are expected to rise by 7% this year*. To put this into real terms, in Sydney it equates to an extra $33.60 on the average weekly rent of $480 for a house and $30.80 on the average weekly rent of $440 for a unit**.”

“Then consider that it looks likely we’ll see interest rate rises of around 0.5% by the end of 2011. For a 30-year $300,000 principal and interest home loan at 7% – by no means the lowest rate available – this equates to $31.30 extra on the required weekly repayment of $460.29.

“Times are tougher financially for both tenants and mortgage holders but at least the latter group has an asset to show for that money spent. Also, those who are investment property owners can, and often do, up the rent they charge to compensate for their repayment rises.

“No wonder Mortgage Choice’s studies show rising rents are greatly influencing many Australians to become property owners. It was the number two motivation for our 2011 Future First Homebuyer Survey respondents, all of whom were planning to buy before February 2013. 42% of our 2011 Recent First Homeowner Survey respondents agreed, having bought in part because increasing rents made owning a property more attractive than renting.

“When it comes to home loan approval criteria these days, some lenders now consider rental history as genuine savings. Also, a number have increased the amount they will lend to 95% of the purchase price and several are dropping their fixed rates, which is good news for borrowers who need the peace of mind that comes with locking in a guaranteed steady repayment level.

“Those debating being a tenant versus a homeowner should note that although rents will rise this year we’re also likely to see interest rate and property price rises. This makes the choice more complicated, requiring focused planning and a thorough investigation into the long term benefits.”

Source: Mortgage Choice

RP Data Rental Review December 2010 Quarter 

 ** Australian Property Monitors Rental Market Report December 10 Quarter



icon-podcast-large

SUBSCRIBE & DON'T MISS A SINGLE EPISODE OF MICHAEL YARDNEY'S PODCAST

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

icon-email-large

PREFER TO SUBSCRIBE VIA EMAIL?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.


Avatar for Property Update

About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'The great debate: to be a tenant or a home owner?' have no comments

Be the first to comment this post!

Would you like to share your thoughts?

Your email address will not be published.
CAPTCHA Image

*

facebook
twitter
google
0
linkedin
0
email

Michael's Daily Insights

Join Michael Yardney's inner circle of daily subscribers.

NOTE: this daily service is a different subscription to our weekly newsletter so...

REGISTER NOW

Subscribe!