‘DEAD MONEY’ Or Owning a House: Is it better to Rent for the Long Term?

QUESTIONS …


Does this article challenge the concept of paying rent to foreign owners of Australian domestic housing?

Does this article challenge the concept that it is fine to have a shrinking proportion of Australians owning their own home while the percentage of foreign owners grows?

Does this article shine a light on ‘money laundering in real estate, on PROXY buyers and VISA manipulation associated with the buying of domestic real estate’?

DON’T THINK SO!

The article did attract some comments about renting in later years but what about these circumstances …


-workers, say 2 adults on average wages are renting
.their rent is so high they are paying 40% of their income to a landlord
.ability to save is very limited
.rent increases regularly
.repairs are not always made, complain and there’s a good chance lease renewal will be refused

What happens next when

-one or both lose employment
-moving out is fraught with difficulties as real estate agents
.claw back ‘repairs’ from bonds
.insisting on professional cleaners – moving out costs can be crippling

Then with less income the renter can’t rent a suitable dwelling in a desired area.

Oh yes I forgot, ‘go and get a better paying job’ and ‘move to the country’

It’s MYTH PEDDLING … what these sort of stories do is they endorse the concept of being a consumer at every level, not only day to day for food and clothing but for shelter too

AS RENTERS …


-What about your credit rating?
-What about how much you pay for insurances?
-What about how much you pay for utilities in rented places where there are no energy savings to be enjoyed?
 

-How often are we asked in a conversation about financial circumstances, ‘and you own your own home?’

-As for renting in later years the picture gets worse, there have been some studies done recently showing older single women

-are particularly worse off not owning a home
-find rental affordability difficult
reluctant response from agents and owners to even rent a property to them

-are often forced to share with others

-are forced to rent sub standard dwellings

And

-also have less super available

It always amazes me being told by a wealthy person that we ought think like he has, especially when he has little to fear from sudden termination of his lease as he has the capacity to easily relocate with a minimum of angst

See what it is really like in Struggle Street … see how you are treated as a renter when you’re not wearing a flash suit and don’t have business cards and clients from the Big End of Town then you‘ll know what it’s like.

VIEW CAAN WEBSITE TO FIND ARTICLES ABOUT RENTING AND MORE ..

THEN we hope you will make your objections known to your local MPs … click on the links below to find their contact details including email and phone!

NSW PARLIAMENT

https://www.parliament.nsw.gov.au/members/pages/all-members.aspx

AUSTRALIAN PARLIAMENT

https://www.aph.gov.au/Senators_and_Members

‘Dead money’ or owning a house: Is it better to rent for the long term?

By business reporter Andrew Robertson

16 OCTOBER 2019

For Lease signs outside an apartment building.

PHOTO: Sub-market rental housing makes up only a small part of Australia’s affordable and social housing. (AAP: Mick Tsikas)

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For most young people these days, the prospect of buying a home early in their working life is now out of the question.

With prices, particularly in Sydney and Melbourne, among the most expensive in the world, the good old days of starting work and buying a house soon after are gone.

A long period of renting awaits.

But contrary to the popular view that renting is dead money, there is an increasing number of people who think all those frustrated buyers may be better off financially by being forced to rent.

Such as businessman Phil Ruthven.

Mr Ruthven is the founder of business information company IBISWorld and can easily afford to buy a house.

He has owned a few in his time, but for the last three decades he has chosen to rent.Australia’s house of cards
Australia’s housing downturn appears to be over … for now. But huge household debts leave the nation vulnerable to a shock.

“I simply did the arithmetic to work out how you might approach retirement being either an owner or a renter,” he told the ABC.

And what he found with his arithmetic surprised him.

“You retire on three times the amount of money that a person who owned a home would if you rented or leased a home for most of your life,” he concluded.

Mr Ruthven said the difference between his rent payments and what a mortgage would have cost has allowed him to plough $1 million into building his business into an international company.

Is renting really ‘dead money’?

Big four accounting firm EY (formerly Ernst & Young) undertook a detailed study of renting versus buying, and reached a similar conclusion.

“More often than not, over a 10-year period, the renter comes out financially better off,” EY chief economist Jo Masters said.

What prompted EY to study renting versus buying was pressure from its large number of millennial workers, who are struggling to get the money together for their first homes.

“We really wanted to question what we found was quite a wide-held belief that renting is dead money and that the only way to get ahead is to buy a property,” she said.

Phil Ruthven, founder of IBISWorld

PHOTO: Phil Ruthven can afford a house, but has chosen to rent for the past 30 years. (Supplied)

Prices are on the rise again after three interest rate cuts this year, with Sydney’s median price pushing $900,000.

That is well ahead of Canberra in second place, with Melbourne the third most expensive.

Even in the cheaper capital cities, you will still need around $500,000 if you want a place to call your own.

EY’s study focused on suburbs in Sydney that are traditionally in high demand by renters.

It found that renters could be up to $600,000 better off over a 10-year period in some of the wealthier suburbs. Even in less salubrious surroundings, $200,000 to $300,000 was not uncommon.

“Our renter had also saved the equivalent deposit,” Ms Masters said.

“They’d also rented where they could afford to buy.

“They invested in a leveraged share portfolio, and they also maintained quite a stringent saving plan.”

They also did their renting at a time when house prices were not skyrocketing, such as the late 1990s into the early 2000s

Home Price Index, September 2019

Graph can be viewed via Source Link Below

.EMBED: CoreLogic September 2019 data.

The benefits of a mortgage

Not everyone is convinced though, such as long-time independent financial adviser Suzanne Haddan, the founder of Sydney-based BFG Financial.

Ms Haddan said having a mortgage forces you to save, but if you are renting, saving is optional.

“Other things come along the way, such as a trip [or a] new car — that can mean you don’t end up wealthier based on that scenario,” she said.

Then there is the leveraged share portfolio Ms Masters referred to, which generates the income for the renters to get ahead.

Margin loans are highly risky, which was demonstrated when thousands of people had their investments wiped out during the global financial crisis.

EY chief economist Jo Masters

PHOTO: EY chief economist Jo Masters says renters are, more often than not, better off than buyers over a 10-year period. (Supplied)

And there are many who believe the current overvalued share market is heading for a big correction in the next few years.

“We acknowledge that a margin loan to buy shares may be a risk profile that many are uncomfortable with,” Ms Masters said.

Ms Haddan agreed and made the point that the house you live in is more than just a financial decision.

“Most of us feel a bit more comfortable if we have a diversified wealth structure,” she said.

“Yes it includes some shares, maybe via our super, but that diversified wealth structure also owns a physical asset [your house].

“You can touch it, you can feel it, and you know the carpet can’t be pulled out from under you because it’s yours.”

Casting a big shadow over the rent-versus-buy debate is retirement, where studies consistently show that renting puts a big hole in living standards.

“You could buy a home and still have heaps left over to live very comfortably if you have rented for 20 or 30 years like I did,” Mr Ruthven said.

Maybe, but Mr Ruthven is not your average renter.

Like all investment decisions though, if you are going to rent long-term instead of buying, you should seek good professional advice.

The quality of your retirement may depend on it.

You can also watch this story on The Business  at 9:45pm (AEDT) tonight on the ABC News Channel or ABC iview

For Lease signs outside an apartment building.

SOURCE: https://www.abc.net.au/news/2019-10-16/buying-versus-renting-property-dead-money/11607832

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