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Institute slams theory renting is cheaper than buying

13 October 2014 Staff Reporter

A real estate institute has disagreed with recent RBA research saying the surge in prices over the past decade has made renting more economically sound than buying.

A real estate institute has disagreed with recent RBA research saying the surge in prices over the past decade has made renting more economically sound than buying.

In July, economists Ryan Fox and Peter Tulip delivered a paper for The Reserve Bank that came to the conclusion Australians are better off renting than buying in the current property market.

REIWA president David Airey said the main benefit with buying is the long-term capital growth that comes from owning a quality asset which is tax free, given the absence of capital gains tax on the family home.

“Home ownership is also a huge advantage in retirement when most people have diminished earning capacity and survive on low and fixed incomes, such as the pension,” he said.

“Australian research shows that pensioners who don’t own their home can spend up to 60 per cent of their income on rent, pushing them into housing poverty.

“So while only very long-term home ownership is the more affordable strategy, it provides the best outcome for people in their later years.”

My Airey said another benefit of buying over renting was the ability to paint, decorate and renovate as you like, as well as shaping the garden.

“There are some personal and psychological benefits to buying that go beyond money,” he said.

“It’s also a lifestyle improvement for many people and can provide a sense of security that isn’t always possible in the rental system.

“In spite of the recent report from the RBA, I don’t know many people who would strongly agree with the findings,” he added.

Mr Airey said he believes most tenants aspire to home ownership and he can’t see that changing much for the time being.

“While it’s true that long-term renting is far more common through Europe and the US, I think social, cultural and economic conditions are different enough in Australia to still nurture the strong desire for home ownership among those who can secure a mortgage,” he said.

Institute slams theory renting is cheaper than buying
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