Is it cheaper to keep renting or buy property in 2022?

Of course, that’s a very loaded question. You can rent in an inner-east suburb like Prahran and pay $815 per week in rent or you could buy in a developing suburb such as Tarneit around the median of $596K and pay $665 per week on your mortgage. You’re not comparing apples with apples, so the answer to the question is yes, it can be cheaper to buy or cheaper to rent depending on what you buy and where you live.

Rents are rising, interest rates are rising and property prices are dropping

With rents rising, interest rates rising but house prices dropping, we thought we’d take a look at  a couple of areas and see whether we could find some apples to compare to determine which scenario stacks up best:

Isn’t paying rent just “dead money”?

Looking it at in terms of pure money outlaid, then in most cases renting is going to be cheaper than buying, no matter which suburb you live in. There are also things like rates, water and sewerage which property owners pay that renters do not which mean your actual out of pocket expenses may be higher. However, the difference in buying property and paying it off is that you are growing your asset base. As you make payments on your principal you grow your equity and can use that equity to invest in more property, shares or other investment vehicles.

Money put towards rent is not “dead money” because it’s providing a roof over your head. However, if you can get a deposit sorted and are in a position to buy, there’s a good chance it’s going to benefit you far more in the long term. Particularly when you look at retirement. Not having to pay a mortgage or rent in retirement means you’ve removed one of the biggest expenses you are currently coving, setting yourself up for a better quality of living later.

Could “rentvesting” be the answer?

Rentvesting is a term used to describe a scenario where you buy property in an area you can afford (such as somewhere like Tarneit, which experienced 11.5% growth last year according to realestate.com.au) but continue to rent where you want to live, such as Prahran. This gives you the best of both worlds, allowing you to live in the suburb you prefer for lifestyle purposes – but potentially may not be able to afford to buy in right now. At the same time you can own an asset, generate income by renting it out and grow your equity. The beauty of this situation is you can use your first property as a stepping stone to the next one, and with smart investing and savvy budgeting over time find you can purchase in your preferred suburb.

Another added benefit is that as an investor, you can claim a range of different expenses back through your tax such as interest paid on the investment loan, maintenance costs and council rates. Chat with your accountant about what you can and can’t claim.

Is renting or buying better for you?

There are a range of different scenarios which might be suitable to your situation. It’s a great idea to chat with a property advisor and a mortgage broker who can take a look at your budget, financials and long term goals. From there they can help you create and execute a strategy to get you where you need to be.

Ready to chat to someone about purchasing your first property?

Get in touch

As a finance and property business, we are firm advocates for the purchase of property to grow your wealth, but it’s important to note that the information in this article is general in nature and not specific to any individual. Median property price and repayments are correct at time of publication. It’s important to seek advice relevant to your own situation and financial position before making any decision on purchasing property.