Your home: Should you rent or own?

For many people in Australia, owning a home isn't a question, it's simply something you do. Figures from the Australian Bureau of Statistics (ABS) support this, as they show that we have one of the highest levels of homeownership in the world, sitting at around 70 per cent since 1966 when records first began.

However, chances are that if you're reading this then you are potentially part of the remaining 30 per cent, which means you will be well aware of property prices seeming to be escalating to astronomical heights.

Unfortunately, you're not wrong, particularly in Sydney and Melbourne. Research from CoreLogic RP Data reveals that our ancestors had it a lot easier when it came to claiming their slice of the Australian dream.

Twenty years ago, nearly all houses on the market in our capital cities sold for less than $400,000 (95.6 per cent), while today the sheer majority are between $400,000 and $1million (52 per cent). Real estate in Sydney has experienced the most significant changes, with just 7.8 per cent of homes below $400,000, and more than a third over $1million.

Despite this, or in fact, because of this, CoreLogic RP Data Analyst Cameron Kusher asserts that weekly rents fell across every capital city for the month of July, with the annual rate of growth reaching a new record low.

"The sluggish pace of rental appreciation continues to be attributed to the ongoing boom in dwelling construction across Australia's capital cities accompanied by record high participation in the housing market from investors," he said.

Essentially, buying a home is becoming more expensive, albeit more rewarding capital gains-wise. Meanwhile renting is becoming more affordable, yet it's not getting you anywhere near the property ladder. Thus, should you buy or rent?

Two benefits of renting

Cash flow

While rent money can sometimes be referred to as 'dead money' as it's going straight to your landlords pockets, generally it will cost you less. As a homeowner, you will have to stump up for mortgage repayments, council rates, bills, repairs and any general maintenance that is required. Meanwhile as a tenant, you will be responsible for the weekly rent payments and your utility bills - that's about it.

The ABS found households that rent from a private landlord pay on average $347 per week, with all the costs included. On the other side of the coin, the average weekly payment for those who own their own home with a mortgage is $432.

Flexibility

If you need or want to move to a new location, as a renter it is quite easy to do so. Simply take your pick from a range of rental properties, give your landlord some notice, pack up your things and go!

According to CoreLogic RP Data, while homes have been selling in record times in Australia's capital cities, the process of selling your home, finding a new place, potentially securing a bridging loan and competing with other buyers can be arduous when compared to the freedom that renting offers.

Two benefits of owning

Security/certainty

One of the issues with renting is that you can never have any real security of tenure. Long-term leases can be hard to come by, the owner may decide to sell or your rent could skyrocket suddenly.

The Australian Psychological Society found that financial issues are the biggest causes of stress among people in our nation, but knowing the roof above your head is your own could certainly help you relax.

Investment

While owning a home may be more expensive than renting, in the long term your money is going into an investment, as the value of your property should increase over time. In fact, figures from CoreLogic RP Data show that the combined value of homes in our capital cites shot up more than 11 per cent in just the 12 months to July 2015.

This would mean had you bought a $600,000 property for sale one year ago, the value of your home would now have increased by around $66,000.