Renting vs Purchasing: Advantages and Disadvantages


It is a fact of life that most young people start off renting a house, apartment or flat when they move out of their parent’s home for the first time. The decision to buy a home is made after considering many factors.

According to the Melbourne Institute Household Financial Conditions Index, released recently, Australians living in Western Australia and Queensland are moving away from renting and are more likely to purchase real estate.

Renting: Advantages

  • If single, renting a house with friends or other young people can be cheaper.
  • Renting an apartment in a big complex can provide additional facilities such as a gym and/or a swimming pool which is fully maintained.
  • Weekly rentals are usually cheaper than a weekly mortgage for a comparable property.
  • No additional fixed outgoings such as council rates or water rates need to be paid.
  • Repairs to the property is carried out by the landlord (unless the damage is caused by the tenant).
  • Ability to vacate a property at short notice, usually one or two months.

Living in a Rental: Disadvantages

  • Landlord’s approval required to keep pets and/or have additional people live in the house.
  • Having to give access to a representative of the property managing agent every three months for an inspection of the premises.
  • No choice of decor in terms of colour or furnishings.
  • The landlord may require the premises to be vacated at a time that is not convenient to the tenant.
  • There is no ‘return on investment’ on the rent paid.

Notwithstanding, living in a rental property will suit some people at a certain stage of their life. For instance when one moves to a new state, it is prudent to live in a rental house while getting used to the area and deciding on where to set up home permanently.

It is also necessary to rent if one is aware that the stay in that area is temporary.

Buying: Advantages

  • Freedom to decide who lives in the premises and whether to have pets or not.
  • No quarterly property inspections.
  • Ability to renovate, redecorate or change certain aspects of the house to suit the taste and lifestyle of the purchasers.
  • The decision whether to move and, if so when, is made by the owners.
  • Wealth creation through capital gains and the ability to use equity in the property for investment purposes.

Living in an Owned Home: Disadvantages

  • The weekly mortgage repayment may be higher than the weekly rental for a similar property.
  • Having to maintain additional facilities like a swimming pool.
  • Total responsibility for all repairs and ongoing maintenance.
  • Having to pay other outgoings such as council and water rates.

Depending on the personal circumstances at any given point in time, renting real estate may be a better option than buying a property. However, in the long term investing in property could be a vehicle for wealth creation.