Renting vs. Co-Buying – We Break it Down!
When you reach a certain stage in your life, with a secure job and career you want to start planning for the future. Thinking “Is now the time to buy a property or continue to rent?”.
Owning a home is the dream of many Australians and buying is the next life step, but recently a lot of young Aussies are renting longer and longer while they save for that house deposit. The Australian Census also highlights this shift towards renting; with 26.9% renting in 1991, compared to 30.9% renting in 2016.
Saving for a deposit has become harder and harder, pushing that homeownership dream farther out of reach. But there are reasons why that deposit is so hard to save for; today's money doesn't go as far as it did in 1981.
Due to the recent surge in house prices matched with little to no wage growth. Housing unaffordability means more households are renting for longer because it’s to harder to gain a foot on the property ladder with higher property prices and bigger deposits.
So we’d like to share with you the benefits and drawbacks to renting vs. co-buying giving you information you need to make an informed decision, right for your unique situation.
There's no simple answer but don't believe the hype, weigh up the pros and cons, and do your own research (backed by numbers). We hope our article helps you realise that not all or nothing when it comes to by property if you cant buy solo you can still "co-buy" by teaming up. Here’s our break down of ”Renting versus Co-Buying“:
- Short-term flexible leases of 6 months, 1 - 2 years
- Not permanently tied to one location, you can move if you don't like the cost of rent/or your area becomes undesirable
- Don’t have to pay for expensive repairs e.g. plumbing, electric, roofing
- Don't have to pay for ongoing costs like water/council rates, strata fees etc.
- Not long-term, as a renter you have no say so to how long you can stay at a property it's ultimately up to the landlord. Lack of security may become more important to you as you grow older.
- You don’t have the same freedom to customise the property e.g. nails in walls to hang pictures
- No tax incentives e.g. no capital gains tax when you sell your primary residence
- Rent will most likely increase year to year
- Gets you onto the property ladder and building equity
- Split upfront costs compared to buying solo e.g. loan fees, interest, stamp duty, conveyancing and legal fees, pest and building inspections, and title registration
- Split ongoing costs like maintenance(property and grounds), water, sewage, council rates, strata fees
- More secure than renting, you decide how long you want to live there for 5 or 25 years
- You can customise the property, hang as many pictures on the wall as you like or even remove the wall to renovate(with the approval from your co-buyer)
- Need to find the right person you trust and draw up a legal agreement
- Financially tied to your co-buyer until you both sell up or one buys the other out down the line
In summary, there are a lot of questions you need ask your self before co-buying a home (including if it’s the right move emotionally as well as financially). Do you need to buy? Will your income grow in the future? Will you stay in a home long enough to benefit from the purchase? Am I ready for the responsibility? If you answer mostly yes then you’re in a good possition to co-buy and enjoy the benefits.
Ultimately to co-buy a property you need a trustworthy co-buying partner and have a stable income (with the potential to grow over time). You can use ASIC MoneySmart mortgage calculator to find out how much your mortgage repayments could be based on your budget.