Sydney and Melbourne’s property markets are projected to cool off this year, helping to regulate the real estate industry.
According to a Mortgage Choice Survey, almost 90% of Australians perceive homeownership as harder to achieve. The 2016 ABS Census Results indicate that homeownership fell from 32.1% in 2011 to 31%.
The number of people renting increased from 29.6% to 30.9% last year. As prices soar, buying a home is not a feasible option in the short-term. Due to tight housing markets, the supply of rental properties is also affected, outstripping demand. By default, many Australians choose to rent instead of buying just because there is not enough money for a deposit.
Renting versus Buying
Whether you should rent or buy a property is an old debate that continues to boggle Australians. There are undoubtedly many benefits associated with purchasing a home: once you meet all mortgage payments, the house will be yours. There’s no need to worry about moving to another property when your landlord increases the rent or needs to repossess the property. There’s also the obvious benefit of being able to do what you like with the house, whether that’s refurbishing or decorating. Unfortunately, ownership comes hand-in-hand with significant responsibilities and obligations such as mortgage payments, insurance, taxes, maintenance and repair costs.
Compare these to the minor headaches of renting a property. You don’t have to think about mortgage payments, taxes, repair costs or purchasing tenant default insurance. All you need to do is pay your utilities and ensure you’re covered by contents insurance. Still, you cannot make structural changes without permission, nor can you argue when rents increase or refuse to leave when the landlord decides they want the property back.
The real estate outlook in Australia
Christopher’s Housing Boom and Bust Report predicted Sydney and Melbourne’s housing markets will likely slow this year, while Perth and Darwin are anticipated to make a recovery. Darwin saw property prices drop to 4% in November 2017 and 5.5% in 2016. Brisbane will likely experience growth from 3-7% while Hobart will continue to grow between 8-13%, according to the same report.
The bottom line is that housing affordability is still declining due to high prices of real estate and wages that are increasing marginally.
On the bright side, if you’re willing to live outside of Sydney and Melbourne, you’re going to get more out of your money in cities like Hobart where the average price of a home is $420,000 which is 58% cheaper than in Sydney.
If you’re looking to invest in property, the hot spots include South Australia (Adelaide), Wollongong and the Central Coast. Deciding whether to rent or not is still a matter of economics and affordability. Whether you are planning to stay for a long time in an area also affects your decision to purchase or lease a property.