Buying Property or Renting? [Australia]

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alex123711
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Joined: Sun May 20, 2018 5:01 am

Buying Property or Renting? [Australia]

Post by alex123711 » Sun May 20, 2018 5:10 am

I have been weighing up between these two options for a while and still can't really come to a conclusion, are you better off buying a house or keeping that money invested/ in index funds and continue renting? My location is Australia, where real estate seems very expensive at the moment, which makes more sense when seeking financial indepedence?

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Pajamas
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Joined: Sun Jun 03, 2012 6:32 pm

Re: Buying Property or Renting? [Australia]

Post by Pajamas » Sun May 20, 2018 1:58 pm

You need to crunch the numbers to decide. Here is an example of a calculator that is specific to Australia but I can't vouch for it myself:

https://www.yourmortgage.com.au/calcula ... nt_vs_buy/

When you crunch the numbers you are making assumptions about the future numbers that may or may not be accurate: investment returns, inflation, taxes, rent increases, etc., so take the final numbers with a grain of salt.

Even then it is not a purely financial decision based on numbers because what you are comparing will probably not be identical. Often people will buy a bigger and nicer home in a better location compared to what they would be willing to rent.

Many people also underestimate the ongoing costs of owning a home and there are a lot of transactional or frictional costs involved in buying, selling, and moving. Generally, you would not want to buy unless you plan to stay put for at least a few years because of those costs.

Then there are purely personal factors such as age, job security, relationship status, one income or two, etc. If you don't have an emergency fund and a sufficient down payment and reasonable expectation of being able to pay the mortgage, reasonably good credit to get a good mortgage interest rate, etc., buying is not the way to go. If you are single but that might change, renting is probably a better choice.

Also it may help to look at your dwelling as an expense and comparing it to an investment is not exactly comparing like things in the first place. You need a place to live and investments, too.

As you can see, there are many previous discussions about this topic as it is a difficult decision.

https://www.google.com/search?q=site%3A ... ent+vs+buy

There are also a couple of threads specific to Australia:

https://www.google.com/search?q=site%3A ... ent+vs+buy

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