by Hayden Groves – REIWA President https://reiwa.com.au/
Choosing whether to buy or rent a property is a big decision. For many people, this choice largely depends on the individual and whether they are willing and able to handle such a large financial commitment.
Although personal circumstances are an important consideration when weighing up this decision there are other factors to consider too, like how the property market is performing and what the past and current trends are in the economic climate.
To help with this decision, REIWA and Curtin University launched the Buy-Rent Index last year, a tool which assesses whether it’s a better time to buy or rent in Perth.
Based on formulated economic assumptions, it identifies the annual house price growth rate required for home ownership to be more financially advantageous than renting.
The latest index, released in May for the March 2018 quarter, shows Perth is currently experiencing the best buying environment it has seen in 5 years, with the annual rate of house price growth required over the next 10 years for buyers to break even declining from 3.3% to 3.1% over the quarter.
To put that figure into perspective, Perth’s annual average house price growth rate has been 5.9% for the last 15 years.
Based on the findings of the latest index, house prices in Perth would now only need to grow by more than 3.1% annually for buying to be considered more financially beneficial than renting.
The improvement in buying conditions across the metropolitan area can be attributed to a number of factors, such as Perth’s median house price softening by 1.9% during the March quarter and the median house rent price increasing $5 to $360 per week.
We’ve also seen the 10 year average mortgage rate drop to 6.43%, which means homeowners are paying less on their mortgage repayments than they previously were.
So, if you’ve been thinking about buying a house now is the time to take advantage of the favourable market conditions.
Ultimately though, the decision to buy or rent is an individual one, dependent on a multitude of financial and personal circumstances.
If you’re weighing up which is the right decision for you, I recommend speaking with a local REIWA agent and seeking their advice about what is the most beneficial for your situation.