For as long as I can remember the question of whether it’s better to rent or buy has been a perennial debate. It’s also been an ongoing topic during the pandemic as people reflect on their personal options.
Regardless of location, since we have experienced lockdowns, lots of people have found themselves living and working in cramped conditions, be that an apartment or house. Living in homes that were not designed for such conditions.
At the same time, everyone has been aware of how low interest rates have fallen producing almost unheard of mortgage rates. We have started to see a rise inpersonal savings at record levels. In many areas, there has also been falling rent and more choice. With all combined, the rent or buy question has taken on added complexity and I’d also suggest, more opportunities.
We’ve also seen strong buyer demand and a focus on outer suburbs and regional areas, to which this trend reflects some Covid influences. However, for buyers, regional prices have taken on greater appeal but this has in some markets created extra pressure on local rental markets. Such market shifts are always complex, and the longer-term trends should not always be taken for granted.
Nonetheless, there’s been more than 12-months when buyer activity has been very strong and, in some locations, outperforming pre-covid conditions. This level of activity is impacting the housing prices, whilst putting further pressure on buyers.
The supply of new builds is also running hot, however there are now emerging supply problems, both internally and for imports, further exacerbating markets.
As prices rise in response to these conditions, I’m expecting that over the next 6-12 months there will be a stronger focus on apartments. These same conditions are also being seen in the USA, United Kingdom and New Zealand.
In some markets, this has sparked concerns of a future post-Covid sharp correction. While this may or may not happen, it appears that buyers are taking a long-term view.
We’re not talking about a speculative market with a short-term view, today’s buyer is looking for security as society adjusts to so much change centred around home and the impacts of different work habits. However, the newly found appetite for regional living might change if companies require workers to begin commuting again. Will that large property in the suburbs or regions still seem as attractive? For buyers, the location is taking on even more relevance.
Turning to the rental market there are some very real differences also centred around location and finances. In some locations in Sydney, Melbourne and Brisbane pockets of oversupply have created competitive rental markets. When faced with degrees of financial uncertainty such conditions are attractive to people renting.
This is a fact brought into sharper focus during the pandemic, understanding that even with low interest rates, buying isn’t for everyone.
Sure, there can be financial benefits for buyers, however, people renting do not face the added costs of rates, home insurance, etc. Covid also appears to have placed greater focus on flexibility, the ability to move for financial or location reasons can also make it more attractive to move (post restrictions) to new areas or interstate.
However, the squeeze for space is a big factor and can be problematic with different ways of living, for example in shared rental accommodation of living with parents or in-laws. Lower rents alongside reduced travel and social activity deliver the bonus of being able to save money, and it’s a trend we’ve seen recently as personal savings have increased.
For many people, there’s a strong focus on security, and while the flexibility of renting can be attractive, and many investors are also look for long-term rental income security, potential buyers have a lot to weigh up. Continuing to rent or buy may not always be a simple question.
Low interest rates, government incentives, and personal freedom are compelling reasons even if there’s a possibility of having to pay more to enter the market. However, some markets can be very competitive, and investors are again very active as future supply is looking thin.
Buyers need to be sensitive to shifting market conditions and even in today’s climate of lockdowns and economic disruption, take the long-term view.
Taking the flipside of the argument, renting often delivers more choice and flexibility. A friend of mine once said that owning a home meant that every time you turn around there’s a new bill for this or that and it all adds up.
If I was looking for a longer-term trend between the two options, I’d say the pandemic might produce greater mobility and flexibility driven by work commitments but also lifestyle. However, I’m also very inclined to put security on my list.
The reality is that the virus isn’t disappearing any time soon. At the beginning of this pandemic, nobody was sure how things would unfold, it was reasonable to think that people would hold off any major decision like buying a new house and moving. As we now know that did not happen, we saw the reverse.
Having security over where you live, especially during a pandemic, or any time really is central because everybody needs a place to live.
That’s never going to change. As it turns out, during the pandemic, many people are looking for a better place to live, different places to live, and as we adapt our lives in the face of the pandemic, buying or renting will remain an important decision with different appeal, and I think having the choice is essential.