Sydney residents better off renting than buying in 60 per cent of like-for like cases since 1992

Tuesday, 16 April 2019

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  • Depending on the period examined, home buyers in suburbs like Canterbury, the CBD and Waverly came off best, while renters in Hunters Hill, Ku-Ring-Gai and Manly came out better than home owners
  • Interactive, embeddable Tableau graphic which allows readers to compare how they fared available
  • EY calls for overhaul of tenancy law to make renting more attractive

A new in-depth economic analysis of ABS, FACS and RBA data has revealed that in 60 per cent of the cases examined between 1992-2017, home buyers would have been better off renting and maintaining a leveraged ASX200 investment than purchasing a home.

This analysis, published in Safe as Houses as an interactive, embeddable Tableau graphic and accompanying website, compared the capital gains experienced by individuals who purchased a home with those investing in a leveraged share portfolio, keeping to a savings plan and renting where they could afford to buy.

In the interactive, readers can choose a suburb and time period to find out whether they are better off having bought a home or rented.

According to EY’s Chief Economist, Jo Masters, this presents an opportunity to shift the focus of the rent or buy debate.

“We would caution against just assuming that homeownership is the only way to create future wealth. The conversation needs to be broader and a consideration of alternatives needs to be a part of the conversation,” said Ms Masters.

“It’s time to give up on the mindset that renting is dead money. Yes, when you’re paying rent to a landlord, you’re not investing in an asset that you own – but with today’s property prices you could be better off renting somewhere affordable and investing the cash you’ve saved.”.

Winners and losers

There’s some big winners and losers in this debate – and in some surprising areas. You’d never think that buying a unit in Woollahra, 5 kilometres east of the Sydney CBD, would be a poor investment choice, but if you purchased in 2004, and sold in 2014, you’d have been better off renting.

“While there are many factors to consider when purchasing a home, renters should consider whether they will be better off purchasing a home or becoming long-term renters”.

“In addition to considering financial wealth, long term renters can also enjoy significant lifestyle benefits – particularly a mobility dividend from being able to easily relocate for work and no longterm maintenance and depreciation risk.

Safe as Houses examines a range of ways to strengthen tenants’ rights to make renting a more feasible option for households looking for greater stability. 
“Tenancy law reform is needed to make renting a more attractive option. The short-term nature of Sydney leases is a critical factor, where other global cities such as New York and Berlin offer broader tenant’s rights, and longer leases – making a rental property more like a home,” Ms Masters said.

“We shouldn’t be pushing an entire generation into unsustainable debt levels – we need to change the wealth creation narrative to explore options other than property,” concluded Jo Masters.

- Ends -

Notes to Editors

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