As 2023 ended, headlines on where it's cheaper to buy rather than rent came to the fore - again.

But when it comes to solely financial details, what does "cheaper" genuinely comprise?

Renting costs

Renters only need to pay rent to their landlord - that's it.

Voilà!

This payment equals a temporary roof over your head and a mortgage payment for your landlord.

Saying this, we're not downplaying the importance of simply having that basic security and comfort - better a temporary roof than none at all, right?

Renters also don't need at least a 5% deposit for said roof, and they're generally only restricted by their rental lease when it comes to a time limit at the property and what can - and can't - be done to it, including having a pet.

Also, if the hot water system fails or similar, renters don't pay this cost - the landlord does.

On the rental downside, rent across the country is rising thanks mainly to a lack of supply, which in turn is due to a post-COVID immigration overflow, reduced building construction and an overall growing population.

In July 2023, CoreLogic's Mapping the Market report - which tracks the yearly change of rental value indexes across Australia - found almost two-thirds of unit suburbs recorded an annual rent increase of 10% or more, as did more than one-third of house markets.

Many property investors have also either left the market, due to tenants' rights swinging higher than that of investors.

Plenty of investors were also happy to sell their properties to eager first home and other buyers during COVID for solid capital gains, which again resulted in a lack of rental supply.

Buying costs

As we've mentioned earlier, home-buyers will not spend their former rent costs - and possibly more - on mortgage repayments.

Tick!

But unlike renters, homebuyers will also need to pay council rates and utilities such as water and sewerage costs.

A townhouse or apartment purchase will also equal body corporate fees - and these can be higher than rates and utility costs combined.

Homeowners need to pay for emergencies such as that failed hot water system along with general maintenance and renovations.

And yes, you'll need a deposit of at least 5% - or, more likely and definitely sensibly, 10%-20%.

Even after six cash rate pauses in 2023, this deposit is the biggest hurdle for homebuyers right now - especially with property prices generally still on the up.

As University of Sydney housing analyst Professor Nicole Gurran, told ABC late last year, "the trend of more places being cheaper to buy than lease is emerging because rents are going up, not because property prices are dropping."

But in good news for homeowners, CoreLogic head of research, Eliza Owen pointed out in April 2023 that ownership has value prospects other than just how it compares to the weekly rent you pay now, including capital growth over time and greater housing security.

Ms Owen also warned against believing the "buying is better than renting" train of thought.

"The suburbs where it’s cheaper to repay a mortgage than rent are largely very cheap markets, most with a median value of $500,000 or less," she said.

"Around 60% of these markets are regional, and of the capital city suburbs, more than half are located in Perth."

In other good news for homeowners, some emergency costs may be included in body corp fees, along with building insurance and common area maintenance.

Most importantly - barring your inability to pay the above costs and of course, your mortgage repayments - your home is yours for life, to generally do with as you please.

Such security is especially significant and comforting for older homebuyers who face the very real possibility of still needing to pay rent - or, pay off a mortgage - after their retirement.

"Being in the private rental market in retirement might not be an issue if you have other streams of income to help cover your cost of living, but older renters in Australia today generally have the highest rates of cost of living stress among their peers," Ms Owen said.

Other real estate possibilities 

If you haven't got the money for a deposit or perhaps you're just not ready to buy or rent, there are other ways to enter the home buying market.

Rentvesting

As we've explained in the past, rentvestors are landlords and rental tenants simultaneously - while living in different houses.

You invest where you can afford to buy and rent where you want to live (but where you probably can't afford to buy).

This group can also utilise their incoming mortgage repayments to pay their rent, with the one financially cancelling out the other.

Co-ownership properties

As we also examined recently, co-owning a property with friends and family can reduce buyer expenses and responsibilities.

This includes legal details of the property, such as stamp duty and the initial deposit as well as benefits such as capital growth and yields.

Both owner-occupiers or investors can be co-owners of a property too.

Conclusion

There is no genuine right or wrong answer when it comes to buying vs renting - and especially so, when it comes to which is cheaper.

So much depends on where you are, both financially, emotionally and literally.

We like how savings.com.au put it:

"Buying property isn't the only way to secure your financial future and build wealth, and renting doesn't mean you're flushing money down the toilet.

"The only difference between the two is that homeowners are buying security and renters are buying flexibility. 

"Neither one is right or wrong - it's a matter of personal preference."

We're here to help

Whatever your property plans are for 2024, rest assured Listing Loop can help you!

As Australia's leading marketplace for off-market and pre-market listings, you'll be ahead of the buyer competition before you even start the purchasing process.

Happy New Year!