Eight reasons owning is better than renting: Chan & Naylor

Eight reasons owning is better than renting: Chan & Naylor
Eight reasons owning is better than renting: Chan & Naylor

Responding to the RBA’s research discussion paper that looked at whether housing is overvalued, Chan & Naylor say that owning makes more financial sense than renting.

The Reserve Bank of Australia research, which suggested that house prices would have to continue to rise at the same rate as that seen over the past six decades to justify buying a property, may set a dangerous precedent, according to Chan & Naylor managing director Ken Raiss.

For housing to be financially viable, they would need to exceed 2.4% growth per annum on the long-term trajectory to beat renting. 

“On paper these figures may seem to make stark economic sense, but the property market, like any other, is cyclical and therefore undergoes peaks and troughs,” said Raiss.

“The other significant factor is that not all properties are created equal. The purchase of a property, whether it is for owner occupation or investment, must be a business rather than emotional process.”

He does, however, say that buyers must be looking to purchase properties that out-do averages and that are below intrinsic value in higher capital growth locations, rather than relying on average national growth.

While those who do not expect a higher than 2.4% growth per annum statistic to continue should turn to renting, the fundamentals of buying early, buying right and holding on long-term still apply, he says.

Turn over page for Chan & Naylor’s eight reasons they think buying is still the best decision.

Chan & Naylor’s eight reasons they think buying is still the best decision:

  1. It is forced savings

    Australians are some of the worst savers in the world, therefore being forced to put your money in a long-term asset is a highly prudent exercise that offers reassurance in later life. There is truth in the old adage that ‘I might retire broke, but at least I have my house’.

  2. It can cover your retirement costs

    The majority of us are living longer however as was evident from the recent budget it is clear that the government can no longer afford to pay for the growing number of pensioners. Having an asset like a house will actually help pay for your long term stay in a retirement or care facility, something that potentially awaits many of us at some point.

  3. Not owning means that you are subject to rental market forces

    As a middle aged unemployed tenant you will be subject to the market forces of the rental market as dictated by your landlord who can throw you out as soon as you fail to meet your rental obligations. Conversely as a home owner it is more likely that you can come to an arrangement with your bank should circumstances require it.

  4. Home ownership gives your financial certainty

    If you have purchased the right property, it will increase in value above the average, but the amount you have borrowed will remain relatively fixed. Rental income however increases with the value of the property market, so do you really know what you will be paying for your two bedder in 30 years’ time?

  5. Home ownership gives you personal certainty

    Buy what you can afford now rather than what you necessarily want and you will be in front as you enter the second half of your life rather than waiting for a late win.

  6. You can leave your grandkids something

    Most people aim to leave their legacy to the next generation and a home is a fantastic asset to pass on.

  7. Bricks and mortar are less volatile than the share market

    If the value of the housing market looks like it is on a downward cycle for now, it is nothing compared to the wild swings of the stock market over the last decade. Where would you rather put your hard earned money?

  8. There is only a finite amount of rental property to choose from

    At end of day everyone needs somewhere to live, and as only 30% of the Australian housing market is owned by investors, limited choice means taking matters into your own hands.

Source: Chan & Naylor

Jennifer Duke

Jennifer Duke

Jennifer Duke was a property writer at Property Observer


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