Now may be a good time for some renters to consider purchasing their own home.
Recent figures from the ABS show that housing costs (the cost of paying rent or a mortgage) are becoming increasingly expensive for renters, but cheaper for owner occupiers with a mortgage.*
The data show that in 2005–06 approximately 19% of household income was committed to mortgage repayments; however, by 2017– 18, this had reduced to just 15.9%. The steady decline is largely due to falling home loan interest rates.
For those who rent, the opposite is happening. Renters have been gradually spending more on their housing costs as a percentage of income over the same period – that figure is now at 20.2%. While this figure does reflect that household income for renters is usually lower, for those renters with a higher household income who could potentially afford to buy, this comparison should give them food for thought.
In monetary terms, the average homeowner with a mortgage currently spends around $500 per week on housing costs, compared to around $400 per week for renters.~ While renters are still spending slightly less than homeowners on housing costs overall, renters stand to continue to pay comparable weekly housing costs indefinitely, whereas homeowners can expect to pay only very minimal housing costs once they own their home. These findings, along with other current market factors such as the First Home Buyers Assistance Scheme, record low interest rates and recent changes to the serviceability rules – which may allow people to borrow more than they could have previously – mean it might be time for renters to consider purchasing.
If you are still renting or know someone who may benefit from some advice on whether they can now afford to purchase their own home, I am always available for a chat.