Australians subscribe to the idea of one day owning their own home.
In a new series called Generation Rent, realestate.com.au rent specialist Emily Hutchinson debunks some of the common myths associated with renting.
From a young age, many Australians subscribe to the idea of one day owning their own home. But is someone a failure if they never purchase a property? Experts agree this simply isn’t the case.
Melbourne psychologist Dr Bert Oraison said he regularly sees patients who are struggling to come to terms with the fact they are unable to buy a property.
He explained the reason they feel this way is due to societal pressure as buying property has been sold as one of life’s key milestones.
“Home ownership is part of the big Australian dream and is identified as a milestone relatable to success and achievement,” Dr Oraison said.
“While many can argue that renting could be more financially advantageous, most people over 40 may feel the social pressure to own a home. There are confounding pressures such as relationship endurance and stability and the presence of children that may lead individuals to buy.”
CEO of Tenants Union NSW Leo Patterson Ross said governments put pressure on Australians to purchase property, reinforcing a sense if failure if they do not.
“People feel pressure to buy property because of two key reasons: firstly, Australia chooses to maintain unstable, unfair tenancy laws that prevent renters from feeling the same sense of being settled and secure; secondly, we have set up a system that transfers wealth from the community to the property owner,” Mr Patterson Ross said.
“When average properties can ‘earn’ more than an average full time wage, completely tax free, people feel very pressured to join in. We don’t always recognise that all property owners are really investors,” he explained.
“People can be made to feel like failures, because in Australia we are often blamed as individuals for failings which are really at a higher level.”
How easy is it to switch from renting to buying?
Government incentives are designed to entice renters to become homeowners.
Last night’s Federal Budget included the Family Home Guarantee, which will allow 10,000 single parents with an annual income below $125,000 to purchase properties with a deposit as low as 2%.
It was also announced that the existing First Home Loan Deposit scheme will be extended by releasing a further 10,000 places and the First Home Super Saver Scheme will increase the maximum amount of voluntary contributions eligible to be released from $30,000 to $50,000.
According to Melbourne-based property manager Sam Nokes of Jellis Craig – Stonnington, the past year has proved more popular than ever for his agency helping renters become homeowners, many of whom weren’t even using government grants to get a foot in the door.
Owning a home is encouraged through government incentives.
“Many people are conscious that the rental market has gone down in value in the last 12 months, and aware that their landlords are going to be seeking rental increases now, so they’re thinking, ‘if house prices are going up anyway, I may as well try to make a move to buy’,” he explained.
“For our marketplace in inner-city Melbourne, the first-home buyer incentives, the value that they’re up to, doesn’t help most people, especially if they’re looking at houses. But what the biggest incentive is that money is cheap and the market’s moving quickly.”
Renters’ biggest issue is saving up the deposit – ideally renters will have a 20% deposit for a home to avoid Lender’s Mortgage Insurance (LMI), and this can be difficult if the renter is also living in a suburb with a high median rent.
Mr Nokes said he has seen renters make various lifestyle changes in order to save up for a deposit, including moving further out to a cheaper rental, moving back in with family and cutting down on lifestyle costs.
However, even buckling down to save can often see renters chasing their tails to keep up with the fast-moving market, he said.
As the market becomes more competitive, saving up for a deposit becomes more difficult for renters who want to buy.
“The market is out-pacing people’s savings. If the value of properties has gone up 20% in the inner city for houses in the last quarter, have your savings increased by 20% to keep up with that? Almost definitely not,” Mr Nokes said.
If a renter can save up for the deposit and other buying costs, for many first-home buyers servicing a mortgage is not dissimilar to paying for rent, he added.
Renters can be just as wealthy as homeowners
Property ownership is a type of investment and investing in property is just one way to create wealth according to ‘My Millennial Money’ podcast host Glen James.
“Investing in shares is an easy one – there’s so many easy and relatively cheap ways to invest in shares at the moment. Micro-investing apps are easy to use, they are great introductions to the behaviour of share investing, and you can invest $10 if that’s all you have each week, fortnight or month,” Mr James said.
He added self-education is also a worthwhile investment, so renters can take up well paying jobs and invest in their superannuation.
The perks of renting forever
There’s a lot of positives that come with renting forever including more freedom to move, giving children better opportunities by renting within top school zones and not having to worry about property management and major home repairs.
Mr Nokes said he has seen renters reap the benefits of running their own business from home. Forever Renters: Can you rent forever as a family?
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“If you’re running your own business from home, it’s far more advantageous to be renting than buying. These renters can claim the rent they’re paying on tax. You actually find that over the financial year your cash flow is a lot better if you run your business from home,” Mr Nokes said.
While owning property is a dream for many and will no doubt continue to be, it can be a tough dream to realise and doesn’t mean failing if it’s unachievable, said Mr Patterson Ross.
“Homes aren’t bought and sold. Homes are made by the people who live in them.”
Article courtesy of Emily Hutchinson at Realestate.com.au
Published realestate.com.au 12 May 2021