With the strength of the Melbourne property market apparent over the past few years and still showing no sign of abating, many Victorians are deliberating whether to rent or purchase their own home. Once affordability is established, there are several other economic factors you should consider before deciding to rent or buy.
Given the current strength of the local rental market, weekly mortgage repayments often equate to less than the weekly median rental value in many suburbs across Melbourne, especially across entry-level properties. Comparision of median home prices and median rental values on realestate.com.au reveals it is currently cheaper to buy a one or two bedroom apartment in Docklands, Melbourne, Southbank or Carlton than rent.
Cost & Savings
Once the initial hurdle of accumulating an adequate deposit is met, buyers need to factor in stamp duty, property maintenance, council rates, utility bills, Owner’s Corporation fees and interest payments for their home, alongside everyday living costs. However many of these costs are still applicable if renting and if any savings are not invested, then any monetary benefits can be short-lived. Whilst renters need to be disciplined savers, buyers have the advantage of their mortgage also serving as a forced savings plan, especially if financed under a loan repaying both principal and interest.
The solid financial returns of property ownership in Melbourne is evident over the past few decades, with the appreciation of home prices superceeding the historical returns from other forms of investment. The potential for long-term capital growth is even greater if purchasing in a blue chip or up-and-coming area, close to transport, amenities and the CBD. Also whilst other investments are subject to capital gains tax when sold, profits from your primary home, or principal place of residence, are currently tax-free.
Lucas Sales Director Chris Henson has witnessed first-hand the affordability of purchasing over renting in the local market and imparts, “There are many great buying opportunities across inner city Melbourne - allowing many buyers to purchase their own home that they can pay off in the future. With interest rates at record lows and stamp-duty savings on offer for first-home buyers, now is a great time for buyers to enter the property market at a price they can afford.”
To find out how to enter the property market, or for assistance with purchasing your own home, contact your local property experts on 9091 1400.