Why renting is on the rise

In his column for Switzer, John McGrath discusses the reasons behind a significant rise of renters in Australia.

Here’s what he had to say: John Mcgrath

There’s been a significant increase in the number of Australians renting their homes over the past two decades.

As discussed in our latest McGrath Report, data from the Bureau of Statistics* shows 26% of Australians are currently renting their homes, up from 18% in 1994-95.

In line with this trend, the percentage of householders who own their home – either with or without a mortgage, has decreased from 71% in 1994-95 to 67% .

So what’s going on?

Is the Great Australian Dream of home ownership dying?first home buyer dreaming house

The short answer is no.

This ingrained cultural value has been passed down the generations and most people would tell you they’d love to own their own home.

But it’s certainly fair to say it’s become harder to achieve in markets like Sydney and as a result, more people – especially the younger ones, are coming up with ways to achieve the dream but in a slightly different format.

The aspiration for home ownership was once all about the house on the quarter-acre block.

Now, more people than ever are aspiring to own apartments and not just because they’re more affordable – people also love the secure, low maintenance lifestyle and close proximity to amenities.

Secondly, the dream of home ownership has been replaced by property ownership in the minds of many Gen Ys.

They still want to own property – particularly after seeing their parents do well through real estate, but they can’t afford to buy where they want to live.

Lifestyle is the priority for these young people, so they rent instead and buy for investment in more affordable markets.

Take a look at the table below provided by CoreLogic RP Data.

It shows the five most popular locations for renters in each of the East Coast capital city markets.

With apartment renting, which is the primary domain of young singles and couples (but we are seeing more families in apartments these days), there is a clear preference for inner ring locations.

Among house renters, predominately families, there is a mix of inner ring locations and commuter areas on their city’s outskirts, which are of course much more affordable.





Source: CoreLogic RP Data, FY2016, suburbs with more than 500 properties

There’s no question that affordability is the key reason we’re seeing more people renting. for rent

Currently, with interest rates so low, there are many areas where it is actually cheaper to buy than rent but if you can’t get the 20% deposit together, it’s irrelevant.

That’s the part that brings many young people unstuck.

In big city markets, a 20% deposit is typically hundreds of thousands of dollars and that’s not easy to save even on a good income.

It can take years.

The biggest plus to renting is the ability to live in many different areas so you can try out different types of lifestyles.

Try the city life for a while, then move to the beach.

Live in a small art deco block with a garden then try high rise living with fantastic residents’ facilities such as a pool and gym.

Renters also have the flexibility of being able to move much more easily than if you owned your home, which would require selling. landlord rights and responsibilities

These days, jobs centres are spread all over our capital cities and people like living close to work, so an inner city renter in Sydney who gets a new job at Parramatta could move there with relative ease.

I’ll always advocate buying over renting because the wealth creation available through property is the best path to long-term financial security for most people.

But if you do rent, why not enjoy these benefits while you can (but keep saving for that deposit!)

*Housing Occupancy and Costs 2013-14, Australian Bureau of Statistics, published October 16, 2015


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'Why renting is on the rise' have 2 comments


    February 3, 2017 Patrick

    Thanks for this article. Many people believe renting is dead money. We’ve found renting is a smart way to free up funds for investing in property much more tax effectively. We’re renting where we want to live for much less than the cost of owning the same property. The trick has been to use our equity to buy neutrally geared investment, higher than normal rent, properties in high growth potential areas (lots of free advice on this available). It’s a bit daunting but paying off your own property is non-deductible debt. In a few years we’ll sell one or two properties and use the equity to buy a place hopefully ( or almost) outright. We’re enjoying the benefits of property ownership with tenants and the tax man paying the bills.


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