Renting could trump buying, says RBA

by Adam Smith15 Jul 2014
The RBA has claimed Aussies may be better off renting if house price growth slows.

A new discussion paper by the Reserve Bank has delved into whether Australians are better off buying or renting. According to the paper, if house prices appreciate accoding to historical trends, buying would be about as costly as renting. But if house price growth slows to a pace below the historical average, the paper claimed the average home buyer would be better off renting.

"Many observers have suggested that future house price  growth is likely to be somewhat less than [the] historic average. In that case, at current prices, rents, interest rates and so on, the average household is probably financially better off renting than buying," the paper said.

The RBA did note the limitations of the study, particularly that the paper focused only on whether households were financially better off buying or renting.

"The decision to buy rather than rent also reflects subjective factors that are difficult to measure such as security of tenure, freedom to renovate, access to finance, pride of ownership, the risk of capital losses and the flexibility of moving," the paper said.


  • by Mrs Oth 15/07/2014 7:32:04 AM

    very interesting....would love to own a home have rented all my working life...we like moving when a home gets too small or doesn't meet our needs

  • by Roger 15/07/2014 10:49:13 AM

    The other factor with home ownership is the "forced savings aspect " By regularly making your mortgage payments you slowly build equity. Sure if you took the difference between a mortgage payment and a rental payment and then invested that difference wisely then financially you would probably be better off, but how many of us have the discipline to do this. Sadly most of just buy a bigger flat screen or spend another week in Bali.

  • by SEQ BRoker 15/07/2014 3:15:12 PM

    HOW NARROW MINDED. Here's a thought that even my 7 year old can grasp. if you enter into a mortgage, you will pay give or take roughly the same repayment for 30 years then it stops. if you rent then what happens to rentals they double every 10 years or so.
    If you look at the benefit of rentals in those respects then owning is some short term pain for long term gain. To evidence I have a mortgage on a property that is P&I now $811 per month. Minimum property rental in the area is $320 per week... and someone is trying to tell me Id be better of renting... What are they smoking?