Over the past sixty years, it's been a part of our our culture to say that there's nothing safer than houses.
But could renting for life actually the gateway to financial success?
For Jodie Klemencic and her family, the cost of owning their suburban McMansion was crippling.
More stories from Today Tonight“The bills were endless. There's the rates, the utilities and also the insurance for the property,” Klemencic said.
The Klemencics sold up, investing the proceeds in shares, and returned to the rental market.
“We save about $600 per month easily in renting rather than buying,” she said.
Live chatMultimillionaire Phil Ruthven lives in a luxury penthouse, but doesn’t own it. The founder and Chairman of IBISWorld is a tenant, and he's been one for the past twenty years.
“It’s not rent that’s money down the drain, it’s interest rates before you've paid off the mortgage. Financially it’s a no-brainer as far as I'm concerned,” Ruthven said.
“I’ve probably saved around about a million dollars over a period over say twenty years.”
More stories from reporter Jackie Quist
Since the 1950s home ownership has been a national obsession, with 70 per cent of us owning or buying. Its firmly entrenched in the Australian psyche that owning our own patch leads to lifelong security.
But will flatling prices and unaffordability give rise to a generation of renters?
For would-be buyer James Liotta the numbers just don’t add up. His share of the rent on his house is $270 a fortnight, but mortgage repayments on a modest home quadruple that.
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“The repayments for a mortgage are way more than renting, and one steps back and thinks ‘can I really do this’, ‘it’s very hard’ and ‘will I survive on $100 a week or $50 a week’?”
Amanda Lynch is CEO of the Real Estate Institute of Australia. She says “we’re predicting that the mining states Queensland and Perth, and the high population (cities), like Sydney and Melbourne, will perform the best in 2012, and with further interest rate cuts this will actually lead to the market improving substantially.”
That average home isn’t cheap anywhere.
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Sydney is the most expensive at a $638,000 average. Melbourne is down two per cent to $550,000. Brisbane is at $428,000, and Adelaide at $389,000. Perth is down six per cent off a big high to $450,000. Darwin is over the half million mark, Hobart is at $345,000, and Canberra at $505,000.
However according to Australian Property Monitors chief economist Andrew Wilson, property is still a worthwhile investment.
“There has been significant capital growth in house prices over the last decade. I don’t think we'll see that repeated over the next decade, but I’m sure we'll continue to see resilient house and market performance, and quite reasonable house price growth,” Wilson said.
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But Klemencic is not convinced. “I think it’s important to have lifestyle rather than just owning things, so to be able to rent and just have the worry gone, it’s a great option.”
The Klemencics pay $1500 a month rent, as opposed to over $2000 in mortgage repayments, plus rates and maintenance costs.
However tenants are still feeling the squeeze, and Darwin is the most expensive state to rent a house. Canberra is now on par with Sydney, while Hobart is the cheapest.
John Dani from IPAC Financial Planners compares the financial benefit of paying off a $530,000 home at 6.5 per cent, compared to $20,000 a year rent.
“You may need to be prepared to have a more humble residence to begin with, to get a foothold into the housing market,” Dani said.
“What we found over a fifteen year period, is that buying a house means that someone is about $175,000 to about $225,000 better off.”
According to Ruthven, “you have to have the discipline of being able to invest. The huge difference between leasing and owning a home if you don’t have that discipline, then (you should) own your own home, because at least it’s a forced saving.”
For Klemencic it’s a more pressing issue though. “It would have been lovely to pass something on to the kids, but providing for them, and having food on the table was much more important,” she concluded.
Contact details- ipac - www.ipac.com.au
