Owning a home is more affordable than many aspiring home buyers expected, with more than two in five recent home owners paying less on their mortgage than they did on rent, a survey from Great Southern Bank has found.
A poll of 1500 first home buyers found that 42 per cent of current home owners actually pay less on their mortgage than renting, while another 26 per cent pay about the same.
This indicated that many would-be home owners overestimate the costs of holding a home loan, said Megan Keleher, Great Southern Bank’s chief customer officer.
“Our research shows that many first home buyers were actually spending more on rent than they do on a mortgage – and this trend is only likely to increase in the current rental market,” she said.
“We know one of the key challenges for many young buyers is saving for a deposit, rather than the ongoing repayments.”
Almost twice as many recent home owners living in regional areas reported that their housing costs decreased (44 per cent) rather than increased (26 per cent).
By contrast, only 37 per cent of home owners living in and around CBDs reported their costs decreased with far more seeing an increase (40 per cent).
For first home buyers still renting and looking to buy, 61 per cent are expecting to pay less on their mortgage each month compared to their existing rent, while 30 per cent expect to pay more for a mortgage than rent.
With many incentives available, and a slowing housing market, buying was looking a lot better than renting, said Nerida Conisbee, Ray White’s chief economist.
“Now is a particularly challenging time for renters with house rents surging by more than 17 per cent since the start of the pandemic and, unlike house prices, rents are not looking like they will slow down any time soon,” she said.
“The number of first home buyers who would potentially pay less on their mortgages than their rent is likely to increase this year, even with an interest rate rise.”
Asking rents jumped by as much as 21 per cent in some capital cities over the past year and further sharp rises are likely in coming months as the number of available rental homes falls to critical levels, data from SQM Research shows.
Ms Keleher of Great Southern Bank said it was not surprising that buying can be more affordable than renting.
“Interest rates have been at record low levels for some time now, making home loans more affordable,” she said.
“There is also a range of government schemes available for first time buyers which can help reduce the amount that buyers may need to borrow for their first loan.”
The biggest mistake first home buyers make was trying to time the market, Ms Conisbee said.
“The earlier you get into the property market, the more time it gives you to pay off a home and upgrade to a better property,” she said.
“Longer term, owning your own home puts you in a vastly different position to a renter, particularly at retirement.
“Consider someone who started renting in Newtown 10 years ago – their rent would have gone up exponentially. Someone who bought at the same time would be paying the same mortgage rate as they were 10 years ago and would also have equity in their property.”
This article is from Australian Financial Review, please click the following link for the original article: https://www.afr.com/property/residential/buying-cheaper-than-renting-for-40pc-of-first-home-buyers-20220419-p5aed0