Whilst it has always been the “Australian Dream” to own a property (even if the bank really owns it) those dreams aren’t on the wish list for every Australian.
The 2011 Census shows 67% of all Australians were owner/occupiers but the number of households who own their home outright has fallen since 1996 from 40.9 per cent to 32.1 per cent. However, the number of households who own their home with a mortgage has increased from 25.5 per cent to 34.9 per cent.
With the lowest mortgage interest rates since the late 1950’s, it could be argued that now, more than ever, was the best time to buy a property and get on the “housing ladder.”
The Queensland's Government “Great State” First Home Owners Grant shows that there has been a surge in the number of first home buyers taking advantage of the $15,000 grant, Queensland Treasury figures show. The number of applications processed in May for the grant, which is given to first home buyers who build a new home, jumped almost 10 per cent compared to the April figure. Many regions experienced double digit percentage increases, particularly the existing home building hotspots.
But of course, this grant is only for first time home buyers and they can only buy brand new homes.
For other home buyers, home loan affordability can be an impediment to purchase, for although mortgage interest rates are low, this very fact creates demand and with demand comes price increase in home prices.
Back in 1982, the Bureau of Statistics revealed that 168,000 or 10% of home buyers spent more than 30% of their gross household income on housing costs. Nearly 30 years later in 2011 these numbers had soared to 640,000, equivalent to 21% of all home buyers.
The trends in housing cost burdens reflect rising real house prices. The history of house prices indicates the recent boom in which real house prices escalate to higher levels than they peaked in the previous boom.
It is therefore not surprising to find that young first time buyers are finding it increasingly difficult to purchase a home. On “a person” basis the rate of home ownership, the prime 25 – 34 year age group has slumped from 56% in 1982 to only 34% in 2011.
The “Australian dream” of home ownership is under threat.
With growing concern over housing affordability plaguing would be first home buyers, the issue of whether to rent or buy is more hotly debated now than it has ever been.
As property prices continue to rise, many young Gen Y’s are concerned that they may have missed their opportunity to get onto the property ladder altogether in the area and location of their choice.
At the same time some commentators insist that Australian housing markets are just too expensive so it makes more financial sense to rent.
For singles and couples without children, the Brisbane Unit Market offers good value and a property of choice.
The Brisbane News reported in 25th March 2015 that Inner-city apartment hunters are in for a bonanza, with a huge supply of new developments set to flood the Brisbane market in 2015.
“But property consultancy Urbis moved to quell the jitters of developers at a business breakfast on Wednesday morning, reassuring agents and investors that demand for inner-city living in the river city has hit record levels.”
“Urbis director Mal Aikman said reports of a glut in the apartment market in 2015 thanks to the release of a wealth of new large scale developments had been wildly exaggerated but admitted supply would easily outstrip demand in the coming year, creating a boon for buyers.”
Some experts are concerned that Brisbane's unit market is approaching an oversupply situation and are even warning against buying new units in the area. "Brisbane is facing a potential oversupply due to the many projects currently under way, so investors are right to be concerned about this and some caution is advised if purchasing in this market," says Linda Phillips, head of research at Propell.
But many professional couples don’t want to live in a Unit – they prefer the leafy suburbs between 5 and 120 km from the City but prices for such homes near to the CBD are expensive.
A recent report in the “Courier Mail” suggested that the number of suburbs with million dollar homes is set to double as low interest rates drive up demand.
Seven of Queensland’s 10 million-dollar-plus median suburbs were in Brisbane, but the capital has another eight neighbourhoods on the cusp of hitting seven-digit medians.
With demand surging, eight other suburbs across Brisbane could soon join the 10, including semirural Gumdale - which fell just $7000 shy of a million-dollar median value. Inner city Clayfield was just over $13,000 shy of the mark, while Rochedale needed a rise of just $15,000 to the million median.
St Lucia was the only seven-digit median suburb to be among the fastest risers over the first three months this year - coming in second off a 7.4 per cent jump in value. The biggest quarterly riser was inner city East Brisbane where the median value for houses ($750,465) was up 9.6 per cent over three months.
Buyers and sellers also seem to have cottoned on to good neighbours of popular suburbs - with suburbs next to the more expensive Graceville - Corinda and Sherwood - both logging a 5.5 per cent jump in median values in the first three months of this year. Corinda went to $690,164 while Sherwood was now sitting on $813,439.
Real Estate Institute of Queensland chief executive Antonia Mercorella said the industry was seeing a strengthening in the prestige market across the board.
“We’re seeing sales volumes in the premium market improving consistently over the first three months of the year,” she said.
For those couples who can’t afford such suburbs but want to live in them, the only option is to rent. Renting is a viable alternative for many couples.
They do this for a number of reasons:
Home ownership in the lifestyle suburbs they desire is too expensive, so they rent in beachside or inner suburbs where there’s a café culture, restaurants, nightlife, entertainment, recreational facilities and easy access to work and instead buy an investment property where they can afford to.
Many professional couples rent in the area of their choice and have one or two investment properties so they have start on the first rung of the property ladder.
Although it is said that paying rent is “dead money” when renting, there are no rates to pay or body corporate fees, or insurance to pay.
It is estimated that it costs 6% of the purchase price in Stamp Fees and legal and mortgage costs and 4% in real estate agent fees and legal fees to sell a property, so a tenant won’t be paying these costs.
The most obvious advantage to renting is flexibility; and tenants can freely relocate from home to home and area to area once your lease expires.
But because of the costs associated with buying and selling property, as a home owner there is less flexibility when it comes to moving house.
One of the big bonuses to renting is that you avoid costly maintenance, repair, rates and insurance bills that go hand in hand with home ownership.
As a tenant, it’s the landlord who is responsible for taking care of such ongoing expenses.
BUT the most obvious disadvantage of renting is being uncertainty as to whether the tenant can remain in the property as long as the tenant wants to and not be asked to leave at the end of the lease or if the property was to be sold.
Tenants have very little say in how long they occupy a rental property.
Essentially the home is never really the tenants.
For instance when renting, the property manager and landlord can come into the property at any time, as long as they provide sufficient notice and have good reason, such as regular inspections which can happen as frequently as every two or three months.
Also tenants cannot make any changes to the property to improve the living space or even put pictures up on the wall without the landlord’s permission.
The other consideration as a tenant is the rising cost of renting. Even though renting may currently be the cheaper option, rents will always continue to rise in line with the increasing values of properties and in some suburbs, there could be little choice of rental properties.
Further, you never stop paying rent, whereas most people will pay off their mortgage within 25 to 30 years.
When you buy a home however, you have a certain sense of stability and you are building equity in the property as property values increase and the amount of mortgage owed is reduced if the owner has chosen a “principal and interest” method of payment.
So whether people buy or rent, there will always be a market for people who wish to buy and those that wish to rent.
There was a 36% increase in the number of private rental properties in Greater Brisbane from 2006 to 2011, so obviously the demand for rental property is not going to reduce.
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