Australian market shifts back to rentals

While housing affordability remains troublesome to home buyers, investors should take note of the comeback renting is likely to make.

In Australia, the housing market is a very difficult thing for the first time homebuyer to get into. The problem is that house prices are so high that a $100,000 deposit is almost necessary. Since so many homebuyers cannot afford such initial payments, nor the costly interest rates on home loans, many will turn to renting, which provides many benefits to the renter and the rentee.

As shown by columnist Nicholas Moore in his piece in the Courier Mail titled, "Rent Is The New Buy," it can be affordable to rent instead of buy. There, he claims that renting property is more cost effective than purchasing. With interest so high on mortgages, you stand to make more by paying the rent instead and investing your additionally money into investments of other types.

The benefits to renters are numerous including paying less in fees and taxes than homeowners do. With these things considered, and the fact that home prices are simply too high for many buyers to get into the market, more and more people are looking to rent. It is an attractive alternative.

While it may be necessary to rent, it is also costly to do that as well. On 5 February, the Reserve Bank of Australia will meet again to discuss rates and will likely raise them again. This is expected to send rents up a further 10 per cent here.

Investors should be aware that renting property here might be more lucrative during a time period that shows soaring home prices. Yet, getting into the market affordably will be the challenge most first time investors will face.