Rent or Buy? Well, It's Personal.

Monday, April 28, 2014

Like most of us, I was brought up with the sense that we when we grow up we get a job, get married, have a family and buy a house. For me, that never really sounded entirely right and while some of those goals my parents had for me have been sought and gained (marriage, child), some haven't (I don't own a home).


That last one I have struggled to come to grips with. Renting or buying is something of a pressure call. Most of us will have to decide relatively early on whether we are working towards a purchase or whether we are long-term renters. It is a big call too because, as the Australian Bureau of Statistics notes, whether we are paying rent or a mortgage, “Housing costs are often the largest regular expenses to be met from a household's current income.”


The ABS also tells us that more of us are renting than buying since at least the end of WWII.


For me, higher entry and transaction costs associated with buying, and a peripatetic lifestyle, have tended to see me leaning towards long term renting. 

I mostly work from home and so want to have that home in a nice area, where it is often too expensive for me to buy. The upside of renting is I've lived in some houses and areas I wouldn't have been able to afford to buy into and I've been able to live in a number of locations here and overseas without the drag of a mortgage or rental property back home weighing down my resources.


The downside is I don't have a property asset.


Many renters, like me, grapple with the counter arguments in favour of home ownership. One factor is, as one expert notes, “rental prices grow, while a property purchase is fixed in dollar terms from the date of purchase.”


There's also the sense of 'dead money' disappearing in rent each week rather than into a solid investment, the tax breaks available in buying a home (for example, the first homeowner's grant) and owning a home (such as negative gearing), and the desire to have a valuable asset to pass on to my daughter. All are worth thinking about.

But, it's not just economics. Now I look at my daughter and feel I have a duty to provide her with a nest-egg in the shape of a fully paid off home. And I am at times uncomfortable with her knowing the roof over her head is actually owned by someone else. There are times I regret not owning a home.

The bottom line is that rent vs buy is not just an economic decision. It's based on a whole range of social, emotional and lifestyle factors, few of which are conclusive, quantifiable or easily explained.

When weighing the pros and cons, we may be encouraged to make a coldly economic decision. But, maybe take the pressure off too much math and let You into the picture. We shouldn't forget the other life goals we might have and that renting or buying is really a lifestyle choice.


We may make our parents go bald, but whether we rent or buy (and if so, when) is a decision we each have to make ourselves.  Unless someone wants to buy me a home – I'll let them make that decision for me....