Buying a Property vs Renting

The numbers are in; Gen Z, the generation stepping into the first home buyer space, are less likely than other generations to own a home and stick to renting. Just 16% of Gen Z are property owners, compared to the 24% of Baby Boomers at the same point in their generation ^[¹^] .

It’s not due to a lack of appetite; 78% of Gen Z homebuyers would be willing to cut lifestyle spending to buy their home.^[²^] However, with rising interest rates and high cost of living, 40% of future Gen Z homebuyers are choosing to wait for more suitable mortgage rates to buy.

While young home buyers are waiting for “perfect” conditions, they may be burning money, and putting more unnecessary stress . The RBA’s recent meeting minutes found that households with a mortgage were, on average, financially stronger than those renting.^[³^].

Adding to this, 48% of 23–24-year-olds live with parents, either paying rent or living rent-free. 38% live out of home and are privately renting, while only 8% own property ^[4].

The Case for Buying

Buying isn’t for everyone, and it is dependent on your situation, finances, goals, and the property market. But if you can afford it, buying has benefits that renting doesn’t.

For one, buying property means more stability. No cranky landlords, no notices to vacate and no last-minute property inspections. If you’re living in your home, you’re your own landlord. Eventually, after 20-30 years, you’ll be able to live in your home with no more cost.

You’ll also be building an investment. While property prices have trended downward in the short term, houses are generally considered a sound investment that has the potential to increase in value over time.

Plus, by paying off your home loan, you can build equity, which may be used for improving your home, refinancing to more suitable loans, or investing.

When is Renting Suitable?

Renting offers more financial flexibility than homeownership and is less of a commitment. If you aren’t ready to decide where you’d like to buy, or are still saving up for a deposit, renting can be useful. A landlord will also usually manage repairs and maintenance since it’s their property.

Generally speaking, rent is fixed during the term of your lease, so you’ll be paying the same amount in rent until the renewal period.

Don’t forget that when it comes to rent, you’re building someone else’s rent and helping someone else pay off their property. At the end of a rental agreement, you’ll have nothing to show for it, while your landlord is likely closer to being mortgage-free and has built their investment.

Is It Cheaper to Rent or Buy?

Historically, month-to-month rental repayments have been touted as being cheaper than a mortgage; however, that’s not always the case. In some areas, mortgage repayments can be similar to, or even cheaper than, a comparable rental repayment.

Rentvesting as a Solution

If you want to buy but can’t buy a home in the area you want to live, rentvesting is an alternative strategy. Rentvesting means buying an investment property, renting it out to tenants and collecting a regular rental income, while you rent a property you love in an area you love.

Rentvesting means the benefits and flexibility of renting, combined with the security of owning property. However, it also includes the drawbacks of both.

If you want to explore Rentvesting more, check out our blog here:

Could Rentvesting be the Solution to the Homebuying Gap.

Renting vs Owning in 2027

With the cash rate being over 1% higher now than it was at the start of this year, renting and owning are both going to become more expensive, however with property prices dropping and rental prices staying high^[5], It’s worth exploring whether buying is possible.

Your local MoneyQuest mortgage broker can help you compare the estimated cost of buying with your current rent, calculate your borrowing capacity, and give you a clearer picture of what homeownership could look like for you. No cost, no obligation, and more choice. Reach out to us today.

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